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400 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco G.R. No. 155108. April 27, 2005.

* REPUBLIC OF THE PHILIPPINES, Represented by Department of Public Works and Highways (DPWH) under Secretary SIMEON DATUMANONG and Undersecretary EDMUNDO V. MIR, then Chairman Of Bid and Awards Committee (BAC), Assistant Secretary BASHIR D. RASUMAN, BAC ViceChairman, Director OSCAR D. ABUNDO, BAC Member Director OIC-Director ANTONIO V. MALANO, JR., BAC Member and Project Director PHILIP F. MENEZ, petitioner, vs. EMILIANO R. NOLASCO, respondent. Courts; Judgments; Obiter Dicta; Words and Phrases; An obiter dictum is a nonessential, welcome and sublime like a poem of love in a last will or unwanted and asinine as in brickbats in a funeral orationit is neither enforceable as a relief nor the source of a judicially actionable claim.An obiter dictum is a nonessential, welcome and sublime like a poem of love in a last will or unwanted and asinine as in brickbats in a funeral oration. It is neither enforceable as a relief nor the source of a judicially actionable claim. However, by reason of its non-binding nature, the pronouncement does not generally constitute error of law or grave abuse of discretion, even if it proves revelatory of the erroneous thinking on the part of the judge. It is chiefly for that reason that this petition is being denied, albeit with all clarifications necessary to leave no doubt as to the status and legal effect of the controvertible Order dated 6 September 2002 issued by Judge Juan C. Nabong, Jr. of the Regional Trial Court (RTC) of Manila, Branch 32. _______________

* SECOND DIVISION. 401

VOL. 457, APRIL 27, 2005 401

Republic vs. Nolasco Actions; Pleadings and Practice; The principle consistently adhered to in this jurisdiction is that it is not the caption but the allegations in the complaint or other initiatory pleading which give meaning to the pleading and on the basis of which such pleading may be legally characterized.It would be difficult to ascertain the nature of Nolascos action if the Court were obliged to rely alone on the caption of his pleading. The caption describes the Petition as one for issuance of a temporary restraining order and/or preliminary injunction; hence, implying that the action seeks only provisional reliefs without the necessary anchor of a final relief. Moreover, the use of Petition in lieu of Complaint seemingly implies that the action brought forth is the special civil action of prohibition under Rule 65, yet this is not supported by the body of the pleading itself as it is bereft of the necessary allegations of grave abuse of discretion or absence/excess of jurisdiction and the absence of any other plain speedy and adequate remedy. Nonetheless, the principle consistently adhered to in this jurisdiction is that it is not the caption but the allegations in the complaint or other initiatory pleading which give meaning to the pleading and on the basis of which such pleading may be legally characterized. An examination of the petition reveals that it should be considered as a complaint for injunction, with a prayer for the provisional relief of temporary restraining order/preliminary injunction. After all, the Petition prayed that respondents therein (Petitioner herein) be restrained from awarding the contracts to Daewoo, citing as basis thereof its unacceptability, as purportedly established by the evaluation report. Government Infrastructure Projects; Republic Act No. 8975; R.A. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity to restrain, prohibit or compel the bidding or awarding of a contract or project of the national government, and the only exception would be if the matter is of extreme urgency involving a constitutional issue, such that unless the temporary restraining order is issued, grave injustice and irreparable injury will arise.Republic Act No. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity to restrain, prohibit or compel 402

402 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco the bidding or awarding of a contract or project of the national government, precisely the situation that obtains in this case with respect to the Agno River Project. The only exception would be if the matter is of extreme urgency involving a constitutional issue, such that unless the temporary restraining order is issued, grave injustice and irreparable injury will arise. The TRO issued by the RTC failed to take into consideration said law. Neither did it advert to any extreme urgency involving a constitutional issue, as required by the statute. The law ordains that such TRO is void, and the judge who issues such order should suffer the penalty of suspension of at least sixty (60) days without pay. Same; Same; Judicial Review; It must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright dismissal of any complaint or petition before the lower courts seeking permanent injunctive relief from the implementation of national government infrastructure projectswhat is expressly prohibited by the statute is the issuance of the provisional reliefs of temporary restraining orders, preliminary injunctions, and preliminary mandatory injunctions; A statute such as Republic Act No. 8975 cannot diminish the constitutionally mandated judicial power to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government.It must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright dismissal of any complaint or petition before the lower courts seeking permanent injunctive relief from the implementation of national government infrastructure projects. What is expressly prohibited by the statute is the issuance of the provisional reliefs of temporary restraining orders, preliminary injunctions, and preliminary mandatory injunctions. It does not preclude the lower courts from assuming jurisdiction over complaints or petitions that seek as ultimate relief the nullification or implementation of a national government infrastructure project. A statute such as Republic Act No. 8975 cannot diminish the constitutionally mandated judicial power to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government. Section 3 of the law in fact mandates, thus: If after due hearing the court finds

that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, 403

VOL. 457, APRIL 27, 2005 403 Republic vs. Nolasco without prejudice to any liability that the guilty party may incur under existing laws. Courts; Judgments; Motions for Reconsideration; Words and Phrases; As far as determinable, there is no legal or jurisprudential standard of comprehensive fairness, a phrase that reeks of pomposity without admitting to any concrete meaning; It is certainly within acceptable bounds of discretion for the trial judge to require or allow the movant for reconsideration to present evidence in support of the arguments in the motion, and in fact desirable if such evidence should be necessarily appreciated for a fair and correct disposition of the motion for reconsideration.As far as determinable, there is no legal or jurisprudential standard of comprehensive fairness, a phrase that reeks of pomposity without admitting to any concrete meaning. Neither is there any mandatory rule directing a court to conduct a hearing to receive evidence on a motion for reconsideration. Nonetheless, a motion for reconsideration, as with all other motions which may not be acted upon without prejudicing the rights of the adverse party, is required to be set for hearing by the applicant, and to be heard with due notice to all parties concerned. It is certainly within acceptable bounds of discretion for the trial judge to require or allow the movant for reconsideration to present evidence in support of the arguments in the motion, and in fact desirable if such evidence should be necessarily appreciated for a fair and correct disposition of the motion for reconsideration. Yet caution should be had. At this stage, the issues and evidence submitted for appreciation and resolution of the trial court should be limited to the matters pertinent to the motion for reconsideration. In this case, the RTC in hearing the motion for reconsideration, should have focused on the issues of lack of standing on the part of Nolasco and non-suability of the State, as these were the grounds on which dismissal of the petition was predicated. It would entail a

fundamental reconsideration of these two key concerns for Nolascos motion to have been granted and the petition readmitted. Same; Same; Dispositve Portions; Obiter Dicta; What should be deemed as the dispositive portion is the final paragraph of the Resolutionthe Court have ruled before against recognizing statements in the body of a decision as part of the dispositive portion.The controverted portion of the Order, urging the DPWH Secretary to consider awarding the Project to China International does not form 404

404 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco part of the dispositive portion or fallo. What should be deemed as the dispositive portion in this case is the final paragraph of the Resolution, which reads: WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of the Petition is hereby DISMISSED. The Court recently explicated the contents of a proper dispositive portion in Velarde v. Social Justice Society: In a civil case as well as in a special civil action, the disposition should state whether the complaint or petition is granted or denied, the specific relief granted, and the costs. The following test of completeness may be applied. First, the parties should know their rights and obligations. Second, they should know how to execute the decision under alternative contingencies. Third, there should be no need for further proceedings to dispose of the issues. Fourth, the case should be terminated by according the proper relief. The proper relief usually depends upon what the parties seek in their pleadings. It may declare their rights and duties, command the performance of positive prestations, or order them to abstain from specific acts. The disposition must also adjudicate costs. We have ruled before against recognizing statements in the body of a decision as part of the dispositive portion. Same; Same; While the allowance of partial judgments may expedite the litigation of claims, it cannot be sanctioned at a stage when the trial judge has not had the opportunity to hear all sides to the claim.At bare minimum, the allowance of a partial judgment at this stage would constitute a denial of constitutional due process. It would condemn before hearing, and render

judgment before trial. Had indeed partial judgment been granted in the assailed Order, it would have been rendered before the Petitioner were afforded the opportunity to rebut the evidence of Nolasco, or to present their own countervailing evidence. While the allowance of partial judgments may expedite the litigation of claims, it cannot be sanctioned at a stage when the trial judge has not had the opportunity to hear all sides to the claim. In fact, it was highly imprudent for the respondent judge to have concluded, as he did in his Order, that it was an admitted fact that the BAC had strayed from fairly applying the Bidding Laws, Guidelines, Rules, and Regulations, and Bid Tender Documents, considering that the Petitioner had not even filed an answer or been allowed the opportunity to present any evidence on its behalf. 405

VOL. 457, APRIL 27, 2005 405 Republic vs. Nolasco Same; Parties; Locus Standi; Taxpayers Suits; The mere invocation of standing as a tax payer does not mean that in each and every instance where such a ground is invoked courts are left with no alternative except to hear the parties, for the courts are vested with discretion whether or not a taxpayers suit should be entertained.Nolascos petition had been correctly dismissed by the RTC on two grounds: that Nolascos general interest as a taxpayer was not sufficient to establish any direct injury to him should the Project be awarded to Daewoo; and that the petition was a suit against the State, which may not prosper without its consent. Given that none of the parties are actually praying that Nolascos motion for reconsideration be granted or that Nolascos petition be reinstated, we need not review in depth the rationale of the RTC in dismissing Nolascos petition. The mere invocation of standing as a tax payer does not mean that in each and every instance where such a ground is invoked courts are left with no alternative except to hear the parties, for the courts are vested with discretion whether or not a taxpayers suit should be entertained. We likewise find no error on the part of the RTC when it cited as basis for the dismissal of Nolascos petition, our ruling in Bugnay Construction & Development Corp. v. Laron that the taxpayer-plaintiff must specifically prove that he has sufficient interest in preventing the illegal expenditure of money

raised by taxation, and that he will sustain a direct injury as a result of the enforcement of the questioned statute or contract. Same; Same; State Immmunity from Suit; An unincorporated government agency such as the Department of Public Works and Highways (DPWH) is without any separate juridical personality of its own and hence enjoys immunity from suit.We also find no error on the part of the RTC in regarding Nolascos petition as a suit against the State without the latters consent. An unincorporated government agency such as the DPWH is without any separate juridical personality of its own and hence enjoys immunity from suit. Even in the exercise of proprietary functions incidental to its primarily governmental functions, an unincorporated agency still cannot be sued without its consent. Moreover, it cannot be said that the DPWH was deemed to have given its consent to be sued by entering into a contract, for at the time the petition was filed by Nolasco, the DPWH had not yet entered into a contract with respect to the Project. 406

406 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco Same; Procedural Rules and Technicalities; Precisely, the messy milieu presented before us occurred because the RTC and Nolasco compromised our court processes to destructive ends, and it is this Courts function to reassert the rules, to restore order, and not compound to the sloppiness by itself violating procedural order.Notably, this Court has not engaged in a review of the award of the Project to Daewoo. Notwithstanding the fact that the parties have prayed that the Court either effect the award of the Project to Daewoo or direct the award to China International, the Court deems it improper to conduct a de novo factual finding on which entity should be awarded the project. The Court is not a trier of facts, and it would be offensive to established order and the hierarchy of courts for this Court to initiate such factual review. Had the RTC conducted a valid trial on the merits, perhaps this Court could eventually review the lower courts findings on the matter, but the RTC properly dismissed the case, and it would be unbecoming on the part of this Court to suddenly engage in an initial trial on the merits on appellate review.

This is a stance not borne out of hesitance to tackle the issue, or avoid the sort of ruling that may satisfy one party or the other as definitive, but arrived at out of necessity to preserve the integrity of our civil procedure, including the hierarchy of our courts and the limits of this Courts power of judicial review. Precisely, the messy milieu presented before us occurred because the RTC and Nolasco compromised our court processes to destructive ends, and it is this Courts function to reassert the rules, to restore order, and not compound to the sloppiness by itself violating procedural order. Same; Judicial Review; Bids and Bidding; Separation of Powers; Policy of NonInterference; The executive department is acknowledged to have wide latitude to accept or reject a bid, or even after an award has been made, to revoke such award, and from these actions taken, the court will not generally interfere with the exercise of discretion by the executive department, unless it is apparent that the exercise of discretion is used to shield unfairness or injustice.The executive department is acknowledged to have wide latitude to accept or reject a bid, or even after an award has been made, to revoke such award. From these actions taken, the court will not generally interfere with the exercise of discretion by the executive department, unless it is apparent that the exercise of discretion is used to shield unfairness or injustice. This policy of noninterference can hardly be countermanded by reason of a claim anchored on an unofficial docu407

VOL. 457, APRIL 27, 2005 407 Republic vs. Nolasco ment such as the Confidential Reports from an Unnamed DPWH Consultant presented by Nolasco, especially when the probative value thereof has hardly been passed upon by a proper trier of facts. Same; Same; Same; Same; Presumption of Regularity; The Court, the parties, and the public at large are bound to respect the fact that official acts of the Government, including those performed by governmental agencies such as the DPWH, are clothed with the presumption of regularity in the performance of official duty, and cannot be summarily, prematurely and capriciously set aside.The Court, the parties, and the public at large are bound to respect the

fact that official acts of the Government, including those performed by governmental agencies such as the DPWH, are clothed with the presumption of regularity in the performance of official duty, and cannot be summarily, prematurely and capriciously set aside. Such presumption is operative not only upon the courts, but on all persons, especially on those who deal with the government on a frequent basis. There is perhaps a more cynical attitude fostered within the popular culture, or even through anecdotal traditions. Yet, such default pessimism is not embodied in our system of laws, which presumes that the State and its elements act correctly unless otherwise proven. To infuse within our legal philosophy a contrary, gloomy pessimism would assure that the State would bog down, wither and die. Same; Judgments; Fake Decisions; It does not escape our attention that on 2 April 2002, the OSG was served a spurious order purportedly giving due course to Nolascos petition and granting the sought-for preliminary injunctionthis incident cannot pass without comment by this Court, which cannot sanction the circulation of fake judicial orders, and should be duly investigated by the National Bureau of Investigation for appropriate action.For the same reason, we cannot allow the Petitioners prayer for damages against Nolasco. The matter of damages is one that has to be properly litigated before the triers of fact, and certainly has not been passed upon by the RTC. Yet it does not necessarily follow that no liability arises from the filing of the initiatory petition, or the facts succeeding thereto. It does not escape our attention that on 2 April 2002, the OSG was served a spurious order purportedly giving due course to Nolascos petition and granting the sought-for preliminary injunction. This incident cannot pass without comment by this Court, 408

408 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco which cannot sanction the circulation of fake judicial orders, and should be duly investigated by the National Bureau of Investigation for appropriate action. PETITION for review on certiorari of a decision of the Regional Trial Court of Manila, Br. 32.

The facts are stated in the opinion of the Court. The Solicitor General for the Republic. Abelardo H. Santos and Sagayo & Yulo Law Offices for respondent E. Nolasco. Quisumbing, Torres for intervenor-movant Daewoo. Magsalin, Pobre, Lapid & Villena Law Offices for intervenor China International Water & Electric Corp. Rogelio Q. Surat amicus curiae. TINGA, J.:

An obiter dictum is a nonessential, welcome and sublime like a poem of love in a last will or unwanted and asinine as in brickbats in a funeral oration. It is neither enforceable as a relief nor the source of a judicially actionable claim. However, by reason of its non-binding nature, the pronouncement does not generally constitute error of law or grave abuse of discretion, even if it proves revelatory of the erroneous thinking on the part of the judge. It is chiefly for that reason that this petition is being denied, albeit with all clarifications necessary to leave no doubt as to the status and legal effect of the controvertible Order dated 6 September 2002 issued by Judge Juan C. Nabong, Jr. of the Regional Trial Court (RTC) of Manila, Branch 32. The root of the dispute is a public works project, the Agno River Flood Control Project (Project), the undertaking of which has been unfortunately delayed due to the present petition. Funding for the project was to be derived primarily 409

VOL. 457, APRIL 27, 2005 409 Republic vs. Nolasco

through a loan from the Japan Bank for International Cooperation (JBIC). A Bid and Awards Committee (BAC) was constituted by the Department of Public Works and Highways (DPWH) for the purpose of conducting international competitive bidding for the procurement of the contract for Package IIthe Guide Channel to Bayambang under Phase II of the Project.1 Six (6) prequalified contractors submitted their bids for the project, among them the present intervenors Daewoo Engineering and Construction Co., Ltd. (Daewoo), and China International Water and Electric Corp. (China International). However, even before the BAC could come out with its recommendations, a legal challenge had already been posed to preempt the awarding of the contract to Daewoo. On 19 February 2002, Emiliano R. Nolasco, a self-identified taxpayer and newspaper publisher/editor-in-chief,2 filed a Petition, seeking a temporary restraining order and/or preliminary injunction, with the RTC of Manila, naming the DPWH and the members of the BAC as respondents. He alleged having obtained copies of Confidential Reports from an Unnamed DPWH Consultant, which he attached to his petition. Nolasco argued that based on the confidential reports it was apparent that Daewoos bid was unacceptable and the putative award to Daewoo, illegal, immoral, and prejudicial to the government and the Filipino taxpayers. Invoking his right as a taxpayer, Nolasco prayed that the DPWH and BAC be restrained from awarding the contract to Daewoo and Daewoo disqualified as a bidder.3 The petition was raffled to the sala of Judge Nabong and docketed as Civil Case No. 02-102923. An ex-parte hearing _______________

1 Rollo, p. 84. The designated members of the Bids and Awards Committee were DPWH Undersecretary Edmundo V. Mir as Chairman; Bashir D. Rasuman, Oscar D. Abundo, Faustino A. Timbol and Antonio V. Molano as Members; and Philip F. Meez as Project Director. Id., at p. 353. 2 Of the Weekly Gazette. Id., at p. 524. 3 Id., at p. 526. 410

410 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco was conducted on the prayer for a temporary restraining order (TRO), with Nolasco alone in attendance. Petitioner issued an Order dated 4 March 2002 directing the issuance of a TRO, enjoining the DPWH and the BAC from awarding the contract to Daewoo and that [Daewoo] be disqualified as bidder and its bidders be rejected from carrying out the Project.4 The term of the TRO was for a period of twenty (20) days. Upon learning of the TRO, the DPWH and the BAC, through the Office of the Solicitor General (OSG), filed a Motion to Dismiss Petition with Motion for Dissolution of Temporary Restraining Order Dated March 4, 2002.5 While noting the impropriety of a twenty (20)-day TRO without prior notice or hearing, they pointed out that Republic Act No. 8975 precisely prohibited the issuance by any court, save the Supreme Court, of a TRO or preliminary injunction which restrains or prohibits the bidding for or awarding of a contract/project of the national government. Accordingly, they prayed that the petition be dismissed and the TRO dissolved. This new motion was set for hearing on 21 March 2002, and thereupon the parties were afforded the opportunity to argue their case. Then, on 27 March 2002, the RTC issued an order dismissing Nolascos petition. The dismissal of the petition was warranted, according to the RTC, as it was a suit against the State, which had been sued without its consent.6 The RTC also noted that Nolasco had not established that he would sustain a direct injury should the contract be awarded to Daewoo, and that the general interest which may have been possessed by Nolasco along with all members of the public would not suffice.7 _______________

4 Id., at p. 201. 5 Id., at p. 202. 6 Id., at pp. 217-218. 7 Ibid.

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VOL. 457, APRIL 27, 2005 411 Republic vs. Nolasco Interestingly, on 2 April 2002, the OSG claims to have received a copy of an alleged order dated 22 March 2002 purportedly signed by Judge Nabong which denied the motion to dismiss, gave the petition due course, and granted the preliminary injunction subject to the posting of an injunction bond in the amount of Five Hundred Thousand Pesos (P500,000.00).8 However, in a Certification signed by Loida P. Moralejo, Officer-in-Charge of RTC Branch 32, it was attested that the signature in this order was spurious, and affirmed instead the Order dated 22 March 2002 dismissing the petition.9 In the meantime, the BAC issued Resolution No. MFCDP-RA-02 dated 1 April 2002. The BAC noted therein that among the three lowest bidders were Daewoo and China International, and that based on the bid amounts as corrected, the bid of Daewoo was the lowest of the three, followed by China Internationals.10 As a result, the BAC resolved to recommend the award of the contract for the Project to Daewoo. Then DPWH Secretary Simeon Datumanong approved the recommendation by affixing his signature on the Resolution on the same day.11 A copy of the Resolution and the Bid Evaluation Report was furnished to JBIC for review and concurrence.12 For his part, Nolasco filed a motion for reconsideration dated 3 April 2002, seeking the reversal of the Order dated 27 March 2002 dismissing his petition. Nolasco set this motion for reconsideration for hearing on 18 April 2002, but none apparently ensued.13 The OSG filed its Opposition/Comment/ _______________

8 Rollo, pp. 252 and 265. 9 Id., at p. 266. 10 Id., at p. 352. 11 Id., at p. 353.

12 Id., at p. 354. 13 The OSG noted in their Opposition/Comment/Manifestation dated 24 April 2002 that they received a copy of Nolascos Motion for Reconsideration only on 16 April 2002, or only two days before the 412

412 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco Manifestation dated 24 April 2002 wherein it prayed that it be allowed to adopt its earlier motion to dismiss as its opposition to the motion for reconsideration. The RTC granted OSGs prayer in an Order dated 13 May 2002.14 In the same Order, the RTC likewise stated that in the spirit of comprehensive fairness, this Court must, and hereby, [set] the hear-ing on the reception of petitioners evidence on this Motion [for Reconsideration] on 17 May 2002.15 During the hearing of 17 May 2002, the OSG asked Judge Nabong to clarify his directive that a hearing be had for the reception of Nolascos evidence. Judge Nabong clarified that his bent was for petitioner to present his evidence but no longer on the question of whether a TRO or injunction should be issued. The RTC granted the OSGs prayer to submit a motion for reconsideration of this order, which the OSG did on 31 May 2002.16 In the motion for reconsideration, the OSG argued that it was unnecessary to receive Nolascos evidence, considering that the dismissal of the petition was grounded on pure questions of law. It also sought clarification of Judge Nabongs remarks during the 17 May 2002 hearing, which seemed to imply that this new hearing would actually be on the merits of the petition. This new OSG motion was submitted to the RTC during the hearing of 28 June 2002, wherein Petitioner announced that the motion was to be resolved in due time. At the same time, the RTC allowed Nolasco to adduce his evidence over the objections of the OSG. Nolasco presented a witness, Engineer Shohei Ezaki, a DPWH consultant hired by JBIC who testified pursuant to a subpoena earlier issued by the court. Ezaki testified as to the Evaluation Report and Result prepared by his consultant firm and which had been earlier at-

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date of hearing, in violation of Section 4, Rule 15 of the Rules on Civil Procedure. Id., at p. 240. 14 Id., at p. 247. 15 Ibid. 16 Id., at p. 96. 41 413

VOL. 457, APRIL 27, 2005 413 Republic vs. Nolasco tached to Nolascos petition. Nolasco also intimated its intention to present DPWH Director Philip F. Meez as a witness on his behalf. In the hearing of 2 August 2002, the OSG manifested that it would file motions opposing the presentation of witnesses by Nolasco and the issuance of subpoenas requiring their testimony. In its order issued in open court on 2 August 2002, the RTC deferred the further presentation of Nolascos witnesses pending the filing of OSGs motions. At that point, the proceedings thus far undertaken had been unorthodox. Then the course veered sharply to the bizarre. Nolasco filed a motion dated 12 August 2002, seeking the rendition of a partial judgment and dismissal of his own petition, based on the proceedings that had transpired during the hearings held on 28 June and 2 August 2002.17 In the motion, Nolasco reiterated his submission that based on the evidence presented thus far, Daewoo should have been disqualified from bidding on the project. While the prayer for the dismissal of the motion for reconsideration was anchored on the need to abbreviate the proceedings so as to implement the projects, the motion nonetheless urged the court, to issue a partial judgment and award the bid for the Project to China International. Nolasco likewise filed a Formal Offer of Evidence dated 29 August 2002. The offered evidence included various

documents and the testimony of Nolasco and his witnesses previously heard by the court. Both submissions of Nolasco were vigorously objected to by the OSG in pleadings filed to that effect.18 Then, on 6 September 2002, the RTC issued the Order now assailed before this Court. It included a brief discussion of the factual antecedents, as well as the 27 March 2002 Order dismissing the petition and the various pleadings filed by the parties prior and subsequent to the dismissal of the petition. _______________

17 Id., at p. 294. The motion is entitled Motion to Issue Partial Judgment and to Dismiss Petition. 18 See Rollo, pp. 315-341. 414

414 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco The last two pages of the four (4)-page Order proceeded to dissect the testimonies and ultimate dispositions therein. The last three paragraphs of the Order and its fallo are replicated below in full: In the hearing, however, on August 21, 2002, Atty. Abelardo M. Santos for petitioner in open court, formally offered the testimony of Mr. Ezaki, although, before the start of his testimony Atty. Santos Manifested: Your Honor, the purpose of the testimony of this witness is to show that they had made a technical study of all the pre-qualified bidders referring to the Agno River Flood Control Project, Phase II. Engr Shohel Ezaki, hired by the Japan Bank for International Cooperation (JBIC) through which the funding, granted by the Overseas Development Assistance (ODA), is covered and flows through, and the DPWH and President, Philippines Office, Nippon Koie Company, Ltd., (testifying under an issued subpoena duces tecum ad testificandum) testified that the Evaluation Report and Result of their consultant firm in association with the PKII and the Basic

Team Inc., (doing evaluation works for the DPWH) disqualified DAEWOO and ITALIAN THAI on Packages 1 and 2, Phase II. Insofar, moreover, as regards Package 1, Phase II, the bids submitted by TOA Corporation is the lowest evaluated responsive bid. The second lowest evaluated responsive bid is that of China State Construction Engineering. In open court, on August 2, 2002, Director Engr. Philip F. Menez, Major Floor Control & Drainage Project-Project Management Office, Cluster II, DPWH, confirmed the award to TOA Corporation, the evaluated responsive bid, Package 1. All told, and presently, and urgently, there is the need to implement the PROJECTS in this petition so as not to affect the ODA funding, harnessed through JBIC. More so, in addition, and a thoughtful consideration of pleadings and argument, from the Formal Offer of Evidence ADMITTED, facts, hearing, respondent BAC has strayed from fairly applying the Bidding Laws, Guidelines, Rules, and Regulations, and Bid Tender Documents and, as a matter of fairness, and in the interest of justice, considering other bidders whose bids have been evaluated by the Technical Working Group including the consultant, Nippon Koie Company, Ltd., in association with the PKII and the Basic Team, Inc., to be substantially responsive, the Honorable Simeon P. Datumanong must now seri415

VOL. 457, APRIL 27, 2005 415 Republic vs. Nolasco ously consider and effect the award of Package 2, PHASE II, of the Agno River Floor Control Project, as duly recommended by the Consultants and the Technical Working Group, DPWH, to China International Water & Electric Corporation being the lowest evaluated responsive bid. WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of the Petition is hereby DISMISSED. SO ORDERED. (Emphasis supplied)19 The OSG received a copy of the Order dated 6 September 2002 on 17 September 2002. It opted to file a Petition for Review on Certiorari under Rule

45 with this Court, instead of resorting to a motion for reconsideration, to avert unnecessary delay of the implementation of the Project which would result in millions of pesos in damages. The OSG thus alleges that the petition raises pure questions of law, thereby dispensing with recourse to the Court of Appeals.20 The OSG also notes that in a letter to the DPWH dated 21 June 2002, JBIC, through Chief Representative Mitsuru Taruki, let it be known that it had decided to hold in abeyance its concurrence to the project, as the issue [was] now under the jurisdiction of the appropriate Philippine courts and other relevant organizations of the Philippine government, and that it would be prudent to wait for the decisions of the proper authorities before taking any action on the matter.21 It is likewise worth noting at this juncture that Nolasco had also filed a verified complaint against the Chairman and members of the BAC with the Presidential Anti-Graft Commission, as well as another complaint with the National Economic Development Authority and a complaintletter with JBIC itself requesting that the bank reject the award to Daewoo.22 _______________

19 Id., at pp. 151-152. 20 See Section 2(c), Rule 41, Rules of Civil Procedure. 21 Rollo, p. 374. 22 Id., at p. 235. 416

416 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco Since the filing of the present petition, both Daewoo and China International have since participated in the case. Daewoo filed a Comment-in-Intervention dated 10 January 2003, which this Court treated as a petition-Inintervention.23 Upon order of this Court, China International filed a Commentin-Intervention dated 5 February 2003.

Petitioner imputes error to the RTC in taking notice of and resolving Nolascos Motion to Issue Partial Judgment and Motion to Dismiss Petition, which they characterize as a trifle. Substantively, it asserts that the RTC erred in directing the DPWH to perform an affirmative act even though the court had no more jurisdiction over the petition, considering that the RTC never resolved the motion for reconsideration filed by Nolasco. It also avers that Nolascos original petition had been substantially amended, without leave of court and without notice to the Petitioner, and that they had not been afforded the opportunity to file an answer to the petition. Moreover, the RTC is alleged to have erred in directing the award of the subject package to China International, a stranger to the case, without ordering the inclusion of Daewoo as an indispensable party. We can recast the legal question within the framework of whether the RTC committed a reversible error in assailed Order dated 6 September 2002. It is a mark of the strangeness of this case that Petitioner seeks the nullification of a dispositive order that affirms the very dismissal of the case they likewise seek. However, given the circumstances, the dilemma of Petitioner is understandable. While the fallo of the assailed Order is indeed favorable to them, the body thereof is a palpable source of mischief. Petitioner assails only the Order of 6 September 2002. However, it behooves this Court to be more comprehensive in approach, in part to elucidate on the proper steps that should be undertaken by lower court judges when confronted with _______________

23 In a Resolution dated 5 February 2003. Id., at p. 718. 417

VOL. 457, APRIL 27, 2005 417 Republic vs. Nolasco complaints or petitions affecting national government infrastructure projects. Our review will necessarily entail an examination of the propriety of the procedure adopted by the RTC in disposing of Nolascos petition. It would be

best for the Court to diagram the procedures undertaken below like a grammar school teacher to illustrate the multiple errors attendant in this case. From a chronological standpoint, the first matter for discussion would be Nolascos Petition before the RTC. The caption of the Petition states that it is for Issuance of a Temporary Restraining Order and/or Preliminary Injunction.24 In the Petition, Nolasco averred that he received a letter from a resident of Bayambang, Pangasinan, regarding the latters observations on the Public Bidding made on the Project; that Nolasco contacted his sources at the DPWH and learned that the Project would be awarded to Daewoo; that he obtained a Confidential Report from an Unnamed DPWH Consultant which allegedly concluded that Daewoos bid was unacceptable. From these premises, Nolasco argued that he was entitled to the issuance of a temporary restraining order or preliminary injunction, as the award to the contracts to Daewoo would probably cause injustice to him as a taxpayer. As prayer, Nolasco asked that the respondents therein (herein Petitioner) be restrained from awarding the contracts to Daewoo and that Daewoo be disqualified as a bidder and its bid rejected. It would be difficult to ascertain the nature of Nolascos action if the Court were obliged to rely alone on the caption of his pleading. The caption describes the Petition as one for issuance of a temporary restraining order and/or preliminary injunction; hence, implying that the action seeks only provisional reliefs without the necessary anchor of a final relief. Moreover, the use of Petition in lieu of Complaint seemingly implies that the action brought forth is the special civil _______________

24 Id., at p. 524. 418

418 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco

action of prohibition under Rule 65, yet this is not supported by the body of the pleading itself as it is bereft of the necessary allegations of grave abuse of discretion or absence/excess of jurisdiction and the absence of any other plain speedy and adequate remedy.25 Nonetheless, the principle consistently adhered to in this jurisdiction is that it is not the caption but the allegations in the complaint or other initiatory pleading which give meaning to the pleading and on the basis of which such pleading may be legally characterized.26 An examination of the petition reveals that it should be considered as a complaint for injunction, with a prayer for the provisional relief of temporary restraining order/preliminary injunction. After all, the Petition prayed that respondents therein (Petitioner herein) be restrained from awarding the contracts to Daewoo, citing as basis thereof its unacceptability, as purportedly established by the evaluation report. Nonetheless, the prayer for the issuance of a temporary restraining order or preliminary injunction affecting the bidding or awarding of a national government contract or project, would have called for the application of Republic Act No. 8975 and the corresponding denial of the prayer for provisional relief. Still, the RTC instead issued a TRO in its Order dated 4 March 2002. Republic Act No. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any temporary restraining order, preliminary injunction, or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity to restrain, prohibit or compel the bidding or awarding of a contract or project of the national _______________

25 See Section 2, Rule 65, Rules of Civil Procedure. 26 Heirs of Amarante v. Court of Appeals, G.R. No. 76386, 21 May 1990, 185 SCRA 585; citing Ras v. Sua, 134 Phil. 131; 25 SCRA 153 (1968); Cajefe v. Fernandez, 109 Phil. 743 (1960). 419

VOL. 457, APRIL 27, 2005 419 Republic vs. Nolasco government,27 precisely the situation that obtains in this case with respect to the Agno River Project. The only exception would be if the matter is of extreme urgency involving a constitutional issue, such that unless the temporary restraining order is issued, grave injustice and irreparable injury will arise.28 The TRO issued by the RTC failed to take into consideration said law. Neither did it advert to any extreme urgency involving a constitutional issue, as required by the statute. The law ordains that such TRO is void,29 and the judge who issues such order should suffer the penalty of suspension of at least sixty (60) days without pay.30 Nevertheless, there is no need to belabor this point since the TRO no longer subsists. It appears that the RTC subsequently realized the import of Republic Act No. 8975 as it cited the same in its 27 March 2002 Order dismissing the Petition: Applying Republic Act No. 8975, most particularly Section 3 thereof, and Administrative Circular No. 11-2000 issued on November 13, 2000 by the Honorable Hilario G. Davide, Jr., Chief Justice, Supreme Court, all parties having copies, the Petition at bench ought to be dismissed outrightly (sic).31 However, it must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright dismissal of any complaint or petition before the lower courts seeking permanent injunctive relief from the implementation of national _______________

27 See Section 3(b), in relation to Section 2(a), Republic Act No. 8975. See also Section 2(c), (d), and (e), Rep. Act No. 8975. 28 See Section 3, Rep. Act No. 8975. 29 See Section 4, Rep. Act No. 8975. 30 See Section 6, Rep. Act No. 8975. 31 Rollo, p. 225. Administrative Circular No. 11-2000, Re: Ban On The Issuance Of Temporary Restraining Orders Or Writs Of Preliminary Prohibitory

Or Mandatory Injunctions In Cases Involving Government Infrastructure Projects, enjoins all judges of lower courts to strictly comply with Rep. Act No. 8975. 420

420 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco government infrastructure projects. What is expressly prohibited by the statute is the issuance of the provisional reliefs of temporary restraining orders, preliminary injunctions, and preliminary mandatory injunctions. It does not preclude the lower courts from assuming jurisdiction over complaints or petitions that seek as ultimate relief the nullification or implementation of a national government infrastructure project. A statute such as Republic Act No. 8975 cannot diminish the constitutionally mandated judicial power to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government.32 Section 3 of the law in fact mandates, thus: If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice to any liability that the guilty party may incur under existing laws. Thus, when a court is called upon to rule on an initiatory pleading assailing any material aspect pertinent to a national government infrastructure project, the court ordinarily may not dismiss the action based solely on Republic Act No. 8975 but is merely enjoined from granting provisional reliefs. If no other ground obtains to dismiss the action, the court should decide the case on the merits. As we recently held in Opia v. NHA:33 Unquestionably, the power to issue injunctive writs against the implementation of any government infrastructure project is exclusively lodged with this Court, pursuant to Section 3 of Rep. Act No. 8975. But while lower courts are proscribed thereunder from issuing restraining orders and/or writs of

preliminary injunction to stop such projects, the proscription does not mean that such courts are likewise _______________

32 See Section 1, Article VIII, Constitution. 33 G.R. No. 161649, 17 November 2004. 421

VOL. 457, APRIL 27, 2005 421 Republic vs. Nolasco bereft of authority to take cognizance of the issue/issues raised in the principal action, as long as such action and the relief sought are within their jurisdiction. Accordingly, it was not proper for the RTC to cite Republic Act No. 8975 as basis for the dismissal of Nolascos petition since the statute does not bar the institution of an action that seeks to enjoin the implementation of a national government project, but merely the issuance of provisional orders enjoining the same. However, the RTC cited two other grounds for the dismissal of the case that Nolascos general interest as a taxpayer was not sufficient to establish any direct injury to him should the Project be awarded to Daewoo; and that the petition was a suit against the State, which may not be sued without its consent. We shall defer for now a review of these two grounds cited by the RTC for the dismissal of Nolascos petition, and instead focus on the proper steps that should have been undertaken owing to the dismissal of the case. Nolasco filed a motion for reconsideration of the dismissal of the case, a remedy available to him since the 27 March 2002 Order is a final order that disposed of the case.34 Petitioner responded with an all-encompassing Opposition/Comment/Manifestation (Re: Petitioners Motion for Reconsideration). Both of these submissions were set for hearing before the RTC. The RTC could have very well resolved the motion for reconsideration

based on the pleadings submitted. Yet, in its Order dated 13 May 2002, it declared: However, be that as it may, in the spirit of comprehensive fairness, this Court must, and hereby, sets the hearing on the Reception of Petitioners evidence on this Motion on May 17, 2002 at 9:00 A.M.35 _______________

34 See Section 1, Rule 37, Rules of Civil Procedure. 35 Supra note 14. 422

422 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco As far as determinable, there is no legal or jurisprudential standard of comprehensive fairness, a phrase that reeks of pomposity without admitting to any concrete meaning. Neither is there any mandatory rule directing a court to conduct a hearing to receive evidence on a motion for reconsideration. Nonetheless, a motion for reconsideration, as with all other motions which may not be acted upon without prejudicing the rights of the adverse party, is required to be set for hearing by the applicant,36 and to be heard with due notice to all parties concerned.37 It is certainly within acceptable bounds of discretion for the trial judge to require or allow the movant for reconsideration to present evidence in support of the arguments in the motion, and in fact desirable if such evidence should be necessarily appreciated for a fair and correct disposition of the motion for reconsideration. Yet caution should be had. At this stage, the issues and evidence submitted for appreciation and resolution of the trial court should be limited to the matters pertinent to the motion for reconsideration. In this case, the RTC in hearing the motion for reconsideration, should have focused on the issues of lack of standing on the part of Nolasco and non-suability of the State, as these were the grounds on which dismissal of the petition was predicated. It

would entail a fundamental reconsideration of these two key concerns for Nolascos motion to have been granted and the petition readmitted. Instead, the RTC, upon Nolascos insistence, proceeded instead to hear the case on the merits. The RTC allowed Nolascos witness, Engineer Ezaki to testify as to the authenticity and veracity of the bid evaluation report attached to Nolascos petition, and to affirm the conclusion that Daewoo was not a qualified bidder.38 This unusual turn of events arouses suspicion. The RTC had earlier dismissed the petition _______________

36 See Section 4, Rule 15, Rules of Civil Procedure. 37 See Sections 4 & 5, Rule 15, Rules of Civil Procedure. 38 Rollo, pp. 297-298. 423

VOL. 457, APRIL 27, 2005 423 Republic vs. Nolasco on legal grounds, yet it was now considering factual matters as basis for review on reconsideration. The petitioner, through counsel, appears to have strenuously objected to this furtive and dubious recourse by Nolasco, but to no avail. Then, despite the fact that other witnesses of Nolasco were still scheduled to be heard, Nolasco filed the Motion to Issue Partial Judgment and to Dismiss Petition. He expressly prayed that his very own motion for reconsideration of the petition be dismissed. From this motion, it is difficult to ascertain why exactly Nolasco wanted the RTC to deny his own motion for reconsideration and to affirm the dismissal of his own petition, though there is the expressed concern in order to abbreviate the proceedings in view of the need to implement the subject projects of this petition the soonest possible time.39 At the same time, and in the same pleading, Nolasco still asserted that Daewoo was not qualified to be awarded the project, and emphasizes that such

contention was borne out by the evidence he had presented thus far. Accordingly, he likewise prayed that partial judgment be rendered on the petition, calling on the RTC to conclude that China International won the Project, it being the lowest evaluated responsive bid.40 It bears noting that at this stage, there were two pending motions before the RTC, both filed by Nolasco, which had at issue whether or not his petition should be dismissed. The first was Nolascos motion for reconsideration praying for the reinstatement of his petition. The second was Nolascos Motion for Partial Judgment and to Dismiss Petition, praying for the dismissal of his petition. Palpably, Nolasco had opted to hedge his chips on both red and black, which is not normally done for obvious reasons. Neither did Nolasco, in his latter pleading, expressly withdraw his earlier motion for reconsid_______________

39 Id., at p. 301. 40 Ibid. 424

424 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco eration, although his subsequent prayer for the dismissal of his own earlier motion sufficiently evinced such intent. This Motion for Partial Judgment and to Dismiss Petition is truly an odd duckling of a pleading, which unfortunately did not blossom into a swan but from it instead emerged an even uglier duckthe 6 September 2002 Order, which dismissed the petition yet intoned that DPWH Secretary Datu-manong must now seriously consider and effect the award of the project to China International. There is no doubt that the assailed Order dated 6 September 2002 sought to resolve the Motion for Partial Judgment and to Dismiss Petition. This is evident from the first sentence of the Order, which states: Before the Court is

petitioners Motion to Issue Partial Judgment and to Dismiss Petition filed on August 16, 2002 . . . . No other pending motion, such as the motion for reconsideration, was adverted to as being subject for resolution by the said Order. Now, the Motion for Partial Judgment and to Dismiss Petition seeks reliefs A and Bthat China International be awarded the project; and that the motion for reconsideration be dismissed. There is no doubt that relief B was unequivocally granted by the trial court, with the following disposal: WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of the Petition is hereby DISMISSED. SO ORDERED.41 But did the trial court grant relief A that China International be awarded the project? All told, and presently, and urgently, there is the need to implement the PROJECTS in this petition so as not to affect the ODA funding, harnessed through JBIC. More so, in addition, and a thoughtful consideration of pleadings and argument, from the Formal Offer of Evidence ADMITTED, facts, hearing, respondent BAC _______________

41 Id., at p. 36. 425

VOL. 457, APRIL 27, 2005 425 Republic vs. Nolasco has strayed from fairly applying the Bidding Laws, Guidelines, Rules, and Regulations, and Bid Tender Documents and, as a matter of fairness, and in the interest of justice, considering other bidders whose bids have been evaluated by the Technical Working Group including the consultant, Nippon Koie Company, Ltd., In association with the PKII and the Basic Team, Inc., to

be substantially responsive, the Honorable Simeon P. Datumanong must now seriously consider and effect the award of Package 2, PHASE II, of the Agno River Floor Control Project, as duly recommended by the Consultants and the Technical Working Group, DPWH, to China International Water & Electric Corporation being the lowest evaluated responsive bid.42 (emphasis supplied) Contrast this with Nolascos prayer on the same relief in his Motion for Partial Judgment and to Dismiss Petition, thus: WHEREFORE, in view of the foregoing premises, and in consideration of equity and petitioners moral obligation and in order to abbreviate the proceedings in view of the need to implement the subject projects of this petition the soonest possible time so an not to jeopardize the funding granted by the Overseas Development Assistance (ODA) fund through the Japan Bank For International Cooperation (JBIC), it is respectfully prayed unto this Honorable Court to issue its partial judgment on the petition. An [sic] in view of the foregoing findings that clear violation of bidding laws, rules and regulations, the respondents Bid Tender Documents, has been committed by the respondents members of the BAC, and in fairness to the other bidder whose bids have been evaluated by the Technical Working Group including the consultant, Nippon Koie Company, Ltd., in association with the PKIII and the Basic Team, Inc. to be substantially responsive, the Bid of China International Water & Electric Corporation being the lowest evaluated responsive bid must be awarded the project, package 2, Phase II, of the Agno River Flood Control Projects as recommended by the Consultants and the Technical Working Group of the respondents. The respondent, Honorable Secretary Simeon Datu_______________

42 Ibid. 426

426 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco

manong is hereby directed to take steps to attain this end.43 (Emphasis supplied) Unmistakably though, the controverted portion of the Order, urging the DPWH Secretary to consider awarding the Project to China International does not form part of the dispositive portion or fallo. What should be deemed as the dispositive portion in this case is the final paragraph of the Resolution, which reads: WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of the Petition is hereby DISMISSED. The Court recently explicated the contents of a proper dispositive portion in Velarde v. Social Justice Society:44 In a civil case as well as in a special civil action, the disposition should state whether the complaint or petition is granted or denied, the specific relief granted, and the costs. The following test of completeness may be applied. First, the parties should know their rights and obligations. Second, they should know how to execute the decision under alternative contingencies. Third, there should be no need for further proceedings to dispose of the issues. Fourth, the case should be terminated by according the proper relief. The proper relief usually depends upon what the parties seek in their pleadings. It may declare their rights and duties, command the performance of positive prestations, or order them to abstain from specific acts. The disposition must also adjudicate costs.45 We have ruled before against recognizing statements in the body of a decision as part of the dispositive portion. In Velarde, the respondents insisted that a statement by the trial court found on page ten (10) of the fourteen (14)-page decision should be considered as part of the dispositive portion. The _______________

43 Rollo, p. 36. 44 G.R. No. 159357, 28 April 2004, 428 SCRA 283. 45 Id., at p. 313. 427

VOL. 457, APRIL 27, 2005 427 Republic vs. Nolasco Court disagreed,46 and cited the precedent in Magdalena Estate, Inc. v. Hon. Caluag:47 . . . The quoted finding of the lower court cannot supply deficiencies in the dispositive portion. It is a mere opinion of the court and the rule is settled that where there is a conflict between the dispositive part and the opinion, the former must prevail over the latter on the theory that the dispositive portion is the final order while the opinion is merely a statement ordering nothing.48 In Contreras v. Felix,49 the Court reasoned: More to the point is another well-recognized doctrine, that the final judgment as rendered is the judgment of the court irrespective of all seemingly contrary statements in the decision. A judgment must be distinguished from an opinion. The latter is the informal expression of the views of the court and cannot prevail against its final order or decision. While the two may be combined in one instrument, the opinion forms no part of the judgment. So, . . . there is a distinction between the findings and conclusions of a court and its Judgment. While they may constitute its decision and amount to the rendition of a judgment, they are not the judgment itself. They amount to nothing more than an order for judgment, which must, of course, be distinguished from the judgment. (1 Freeman on Judgments, p. 6.) At the root of the doctrine that the premises must yield to the conclusion is perhaps, side by side with the needs of writing finis to litigations, the recognition of the truth that the trained intuition of the judge continually leads him to right results for which he is puzzled to give unimpeachable legal reasons. It is an everyday experience of those who study judicial decisions that the results are usually sound, whether the reasoning from which the results purport to flow is sound or not. (The Theory of Judicial Decision, Pound, 36 Harv. Law Review, pp. 9, 51.) It is not infrequent that the grounds of a decision fail to reflect the exact views of the court, especially those of concurring justices in a collegiate court. We often _______________

46 Id., at p. 308.

47 120 Phil. 338; 11 SCRA 333 (1964). 48 Id., at p. 343; p. 338; cited in Velarde, supra note 41 at p. 308. 49 78 Phil. 570 (1947). 428

428 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco encounter in judicial decisions, lapses, findings, loose statements and generalities which do not bear on the issues or are apparently opposed to the otherwise sound and considered result reached by the court as expressed in the dispositive part, so called, of the decision.50 Moreover, we are guided by the evident fact that the respondent-judge did not intend to make his conclusions on who should be awarded the Project as part of the dispositive portion of his order. The language deliberately employed in the order, must now seriously consider and effect the award, indicates that the judge was hesitant to definitively grant the relief sought by Nolasco, which was that the trial court award the bid to China International and direct Sec. Datumanong to take steps towards this end. Instead, it stated that Sec. Datumanong must now seriously consider and effect the award to China International. Undoubtedly, the word must is mandatory in character, but it is used in conjunction with consider. In short, the trial court noted that the DPWH Secretary must think about effecting an award to China International. Imagine if Nolasco had tried to judicially enforce this portion of the decision. Agents of the court would be sent over to the DPWH offices to confront the DPWH Secretary. What else could they say but, Sir, have you seriously considered effecting the award to China International? Of course, the DPWH Secretary can reply, Yes, but I decided to award the bid anyway to Daewoo, and such averment would evince satisfactory compliance with the assailed Order. After all, the Order did not require that the DPWH award the bid to China International, only that the DPWH consider such a measure.

These premises considered, we cannot agree with Petitioner characterization of this portion of the Order as granting affirmative relief in favor of China International.51 No such affirmative relief was rendered in favor of China Inter_______________

50 Id., at pp. 577-578. 51 Rollo, p. 134. 429

VOL. 457, APRIL 27, 2005 429 Republic vs. Nolasco national, as such was not included as part of the fallo. Nor was there an evident intent on the part of the judge to grant such affirmative relief, on account of the language he employed, recommendatory in character as it ultimately was. Still, if the Court were to construe this assailed portion of the Order as belonging to the dispository part, such disposition, effectively concluding that China International and not DAEWOO should be awarded the bid, would run contrary to law. It must be remembered that Nolascos prayer that the trial court award the bid to China International utilized as legal basis the power of the trial courts to issue partial or separate judgments. Yet by any objective standard, there is no merit in allowing for such a relief in this case. Section 5, Rule 36 of the Rules of Civil Procedure, which governs separate judgments, states: Sec. 5. Separate judgments.When more than one claim for relief is presented in an action, the court, at any stage, upon a determination of the issues material to a particular claim and all coun-terclaims arising out of the transaction or occurrence which is the subject matter of the claim, may render a separate judgment disposing of such claim. The judgment shall terminate the action with respect to the claim so disposed of and the action shall proceed as to the remaining claims. . . .

On paper, Nolascos petition prays for two reliefs, that the petitioner be restrained from awarding the Project to Daewoo, and that Daewoo be disqualified as a bidder and its bid be rejected. Yet these reliefs are obviously intertwined for the allowance of one would necessarily lead to the grant of the other. The multiple reliefs referred to in the provision refer to those sufficiently segregate from each other that the allowance of one at a preliminary stage will not preclude litigation on the merits of the others. More importantly, the rule is explicit that partial judgment with regards one of the reliefs is warranted only after a de430

430 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco termination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrence which is the subject matter of the claim. Herein, the partial judgment was sought even before the respondents had the chance to file their answer to the petition. Moreover, it was prayed for at a point when, at even such a preliminary stage, the claimant was actually somehow able to already present evidence in support of his claim, but before the respondents had the chance to rebut this claim or support countervailing evidence. At bare minimum, the allowance of a partial judgment at this stage would constitute a denial of constitutional due process. It would condemn before hearing, and render judgment before trial.52 Had indeed partial judgment been granted in the assailed Order, it would have been rendered before the Petitioner were afforded the opportunity to rebut the evidence of Nolasco, or to present their own countervailing evidence. While the allowance of partial judgments may expedite the litigation of claims, it cannot be sanctioned at a stage when the trial judge has not had the opportunity to hear all sides to the claim. In fact, it was highly imprudent for the respondent judge to have concluded, as he did in his Order, that it was an admitted fact that the BAC had strayed from fairly applying the Bidding Laws, Guidelines, Rules, and Regulations, and Bid Tender Documents, considering that the Petitioner had not even filed an answer or been allowed the opportunity to present any evidence on its behalf.

_______________

52 This safeguard, the first listed in the Bill of Rights, includes what is known as procedural due process that guarantees a procedure which, according to Daniel Webster, hears before it condemns, which proceeds upon inquiry and renders judgment only after trial. Pagasian v. Judge Zura, A.M. No. RTJ-89425, 17 April 1990, 184 SCRA 391. See also, e.g., U.S. v. Ling Su Fan, 10 Phil. 104, 111; National Power Corporation Supervisors Union v. National Power Corporation, 193 Phil. 696; 106 SCRA 556 (1981). 431

VOL. 457, APRIL 27, 2005 431 Republic vs. Nolasco And there is the fact that as of the moment the assailed Order was rendered, Nolascos petition had already been dismissed by the earlier Order dated 27 March 2002. In order that the prayer for partial judgment could have been granted by the RTC, it would have been first necessary to reinstate Nolascos dismissed petition, such as by granting Nolascos motion for reconsideration. The respondent judge never reinstated the petition, which has stood dismissed since 27 March 2002. Thus, none of the reliefs prayed for by Nolasco in his Petition, much less the prayer for partial judgment, could have ever been granted by the respondent-judge. Thus, the dispositive portion of the assailed Order correctly limited itself to the denial of Nolascos motion for reconsideration without allowing any other relief that Nolasco prayed for in his Motion for Partial Judgment and to Dismiss Petition. Had the judge instead opted to grant partial judgment and direct the award of the Project to China International, the Court would not hesitate to strike down such award. Yet the judge did not act so unequivocally, and merely advised that the DPWH Secretary should consider such an option. Perhaps the propriety of such advice can be appropriately questioned, in light of our view that such conclusion was derived without allowing the DPWH or an injured party such as Daewoo opportunity to be heard and to present their own evidence. Nonetheless, such advisory opinion has no binding effect, especially if

construed as directing the award of the Project to China International. Accordingly, for that reason alone and with the necessary clarifications made, there is no reason to set aside the assailed Order dated 6 September 2002, especially considering that its final disposition dismissing Nolascos motion for reconsideration is ultimately correct. Nolascos petition had been correctly dismissed by the RTC on two grounds: that Nolascos general interest as a taxpayer was not sufficient to establish any direct injury to him should the Project be awarded to Daewoo; and that the petition was a suit against the State, which may not prosper without its consent. Given that none of the parties are actually praying 432

432 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco that Nolascos motion for reconsideration be granted or that Nolascos petition be reinstated, we need not review in depth the rationale of the RTC in dismissing Nolascos petition. The mere invocation of standing as a tax payer does not mean that in each and every instance where such a ground is invoked courts are left with no alternative except to hear the parties, for the courts are vested with discretion whether or not a taxpayers suit should be entertained.53 We likewise find no error on the part of the RTC when it cited as basis for the dismissal of Nolascos petition, our ruling in Bugnay Construction & Development Corp. v. Laron54 that the taxpayer-plaintiff must specifically prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation, and that he will sustain a direct injury as a result of the enforcement of the questioned statute or contract.55 We also find no error on the part of the RTC in regarding Nolascos petition as a suit against the State without the latters consent. An unincorporated government agency such as the DPWH is without any separate juridical personality of its own and hence enjoys immunity from suit.56 Even in the _______________

53 Macasiano v. National Housing Authority, G.R. No. 107921, 1 July 1993, 224 SCRA 236, 244. 54 G.R. No. 79983, 10 August 1989, 176 SCRA 240. 55 Id., at pp. 251-252. However, for the above rule to apply, it is exigent that the taxpayer-plaintiff sufficiently show that he would be benefited or injured by the judgment or entitled to the avails of the suit as a real party in interest. Before he can invoke the power of judicial review, he must specifically prove that he has sufficient interest in preventing the illegal expenditure of the money raised by taxation and that he will sustain a direct injury as a result of the enforcement of the questioned statute or contract. It is not sufficient that he has merely a general interest common to all members of the public. 56 Farolan v. Court of Tax Appeals, G.R. No. 42204, 21 January 1993, 217 SCRA 298, 306. [W]hen a suit is directed against said unincorporated government agency which, because it is unincorporated, possesses no juridical personality of its own, the suit is 433

VOL. 457, APRIL 27, 2005 433 Republic vs. Nolasco exercise of proprietary functions incidental to its primarily governmental functions, an unincorporated agency still cannot be sued without its consent.57 Moreover, it cannot be said that the DPWH was deemed to have given its consent to be sued by entering into a contract, for at the time the petition was filed by Nolasco, the DPWH had not yet entered into a contract with respect to the Project. Surprisingly, and with no apparent benefit on its behalf, Petitioner imputes error on the part of the RTC when the court, in the fallo of the assailed Order, directed the dismissal of the Motion for Reconsideration of the Petition, pointing out that such pleading was never filed by Nolasco,58 and accordingly prays that the order dismissing the alleged Motion for Reconsideration of Petition be declared null and void.59 However, Nolasco did file a Motion for Reconsideration to the order dismissing the petition, and in his Motion for

Partial Judgment and to Dismiss Petition, Nolasco similarly prays that the Motion for Reconsideration of the Petition be dismissed. We have no doubt, infelicitous wording aside, that the Motion for Reconsideration of the Petition adverted to in the fallo refers to Nolascos own motion for reconsideration, the denial of which Nolasco also prayed for in the Motion for Partial Judgment and to Dismiss Petition that was the subject of the assailed Order. And as just discussed, the denial of the Nolascos motion for reconsideration was in order. Notably, this Court has not engaged in a review of the award of the Project to Daewoo. Notwithstanding the fact that the parties have prayed that the Court either effect the award of the Project to Daewoo or direct the award to China Interna_______________

against the agencys principal, i.e., the State. Philippine Rock Industries, Inc. v. Board of Liquidators, G.R. No. 84992, 15 December 1989, 180 SCRA 171. 57 A.B. Nachura, Outline Reviewer in Political Law, 2000 Ed., at p. 22. 58 Id., at p. 115. 59 Id., at p. 142. 434

434 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco tional, the Court deems it improper to conduct a de novo factual finding on which entity should be awarded the project. The Court is not a trier of facts, and it would be offensive to established order and the hierarchy of courts for this Court to initiate such factual review. Had the RTC conducted a valid trial on the merits, perhaps this Court could eventually review the lower courts findings on the matter, but the RTC properly dismissed the case, and it would be unbecoming on the part of this Court to suddenly engage in an initial trial on the merits on appellate review.

This is a stance not borne out of hesitance to tackle the issue, or avoid the sort of ruling that may satisfy one party or the other as definitive, but arrived at out of necessity to preserve the integrity of our civil procedure, including the hierarchy of our courts and the limits of this Courts power of judicial review. Precisely, the messy milieu presented before us occurred because the RTC and Nolasco compromised our court processes to destructive ends, and it is this Courts function to reassert the rules, to restore order, and not compound to the sloppiness by itself violating procedural order. The executive department is acknowledged to have wide latitude to accept or reject a bid, or even after an award has been made, to revoke such award. From these actions taken, the court will not generally interfere with the exercise of discretion by the executive department, unless it is apparent that the exercise of discretion is used to shield unfairness or injustice.60 This policy of non-interference can hardly be countermanded by reason of a claim anchored on an unofficial document such as the Confidential Reports from an Unnamed DPWH Consultant presented by Nolasco, especially when the probative value thereof has hardly been passed upon by a proper trier of facts. _______________

60 Hutchison Ports Philippines Limited v. Subic Bay Metropolitan Authority, G.R. No. 131367, 31 August 2000, 339 SCRA 434, 443. 435

VOL. 457, APRIL 27, 2005 435 Republic vs. Nolasco More importantly, the Court, the parties, and the public at large are bound to respect the fact that official acts of the Government, including those performed by governmental agencies such as the DPWH, are clothed with the presumption of regularity in the performance of official duty, and cannot be summarily, prematurely and capriciously set aside.61 Such presumption is operative not only upon the courts, but on all persons, especially on those who deal with the government on a frequent basis. There is perhaps a more cynical

attitude fostered within the popular culture, or even through anecdotal traditions. Yet, such default pessimism is not embodied in our system of laws, which presumes that the State and its elements act correctly unless otherwise proven. To infuse within our legal philosophy a contrary, gloomy pessimism would assure that the State would bog down, wither and die. Instead, our legal framework allows the pursuit of remedies against errors of the State or its components available to those entitled by reason of damage or injury sustained. Such litigation involves demonstration of legal capacity to sue or be sued, an exhaustive trial on the merits, and adjudication that has basis in duly proven facts and law. No proper and viable legal challenge has emerged impugning the award of the Project by DPWH to Daewoo, Nolascos Petition being woefully insufficient to that purpose. It is tragic perhaps that the irresponsible actions of Judge Nabong, and their ultimate embodiment in his obiter dicta in the assailed Order, somehow fostered the illusion that there was a serious legal cloud _______________

61 See Republic v. De los Angeles, G.R. No. L-30240, 25 March 1988, 159 SCRA 264. The [Garments and Exports Textile Board], as an administrative agency, has in its favor the presumption that it has regularly performed its official duties, including those which are quasi-judicial in nature. In the absence of clear facts to rebut the same, said presumption of regularity must be upheld. Garments and Textile Export Board v. Court of Appeals, 335 Phil. 723; 268 SCRA 258 (1997). 436

436 SUPREME COURT REPORTS ANNOTATED Republic vs. Nolasco hovering over the award by DPWH to Daewoo. We rule that there is none, that the RTC acted correctly in granting the Petitioners motion to dismiss Nolascos Petition and in denying the subsequent motion for reconsideration to the

dismissal. These are the only relevant matters properly brought for judicial review and everything else is unnecessary verbi-age. For the same reason, we cannot allow the Petitioners prayer for damages against Nolasco. The matter of damages is one that has to be properly litigated before the triers of fact, and certainly has not been passed upon by the RTC. Yet it does not necessarily follow that no liability arises from the filing of the initiatory petition, or the facts succeeding thereto. It does not escape our attention that on 2 April 2002, the OSG was served a spurious order purportedly giving due course to Nolascos petition and granting the sought-for preliminary injunction. This incident cannot pass without comment by this Court, which cannot sanction the circulation of fake judicial orders, and should be duly investigated by the National Bureau of Investigation for appropriate action. Finally, it likewise appears that Judge Nabong, by issuing the temporary restraining order dated 4 March 2002, violated Section 6 of Republic Act No. 8975, which penalizes the judge who issues a temporary restraining order enjoining the bidding or awarding of a contract or project of the national government.62 Yet to his credit, Judge Nabong recalled the TRO upon realizing his error, thus a REPRIMAND should suffice under the circumstances. WHEREFORE, premises considered, the Petition is DENIED. The assailed Order dated 6 September 2004 is AFFIRMED, with the QUALIFICATION that last paragraph of the body of the Order, which states that the DPWH Secretary must now seriously consider and effect the award of Package _______________

62 See Section 6, Rep. Act No. 8975. 437

VOL. 457, APRIL 27, 2005 437 Republic vs. Nolasco 2, Phase II of the Agno River Flood Control Project . . . is

OBITER DICTA and hence of no binding force. The National Bureau of Investigation is hereby DIRECTED to investigate the circumstances surrounding the alleged spurious order dated 22 March 2002 served on the Office of the Solicitor General and determine possible criminal liabilities for the creation of such forged document. Judge Juan Nabong is hereby REPRIMANDED for failure to observe Section 6 of Republic Act No. 8975, and WARNED that a subsequent repetition of the same shall be dealt with more severely. No costs. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur. Petition denied, assailed order affirmed with qualification. Notes.If there is no meaning in it, said the King in Alice in Wonderland, that saves a world of trouble, you know, as we neednt try to find any. (Demafiles vs. Commission on Elections, 21 SCRA 1462 [1967]) Any attempt to undermine the Judiciary by subverting the administration of justice, and, to make a mockery of Court decisions and Philippine jurisprudence itself, must not go unnoticed. (Re: Fake Decision Allegedly in G.R. No. 75242, 451 SCRA 357 [2005]) o0o

438

Copyright 2013 Central Book Supply, Inc. All SCRA 400(2005)] G.R. No. 145328. March 23, 2006.*

[Republic vs. Nolasco, 457

EDUARDO F. HERNANDEZ, MA. ENCARNACION R. LEGASPI, JAIME BLANCO, JR., ENRIQUE BELO, CARLOS VIAPLANA, CARL FURER, VIVENCIO TINIO, MICHAEL BRIGGS, ROSA CARAM, FAUSTO PREYSLER, ROBERT KUA, GEORGE LEE, GUILLERMO LUCHANGCO, PETER DEE,

LUISA MARQUEZ, ANGELITA LILLES, JUAN CARLOS, HOMER GO, AMADEO VALENZUELA, EMILIO CHING, ANTONIO CHAN, MURLI SABNANI, MARCOS ROCES, RAYMUNDO FELICIANO, NORMA GAFFUD, ALF HOLST, LOURDES P. ROQUE, MANUEL DY, RAUL FERNANDEZ, VICTORIA TENGCO, CHI MO CHENG, BARANGAY DASMARIAS, AND HON. FRANCISCO B. IBAY, petitioners, vs. NATIONAL POWER CORPORATION, respondent. Civil Procedure; Injunctions; Temporary Restraining Orders; Presidential Decree (P.D.) No. 1818; Presidential Decree No. 1818 was issued on 16 January 1981, prohibiting judges from issuing restraining orders against government infrastructure projects.Presidential Decree No. 1818 was issued on 16 January 1981, prohibiting judges from issuing restraining orders against government _______________

* FIRST DIVISION. 167

VOL. 485, MARCH 23, 2006 167 Hernandez vs. National Power Corporation infrastructure projects. In part, the decree says, No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction or preliminary order, preliminary mandatory injunction in any case, dispute or controversy involving an infrastructure project. Realizing the importance of this decree, this Tribunal had issued different circulars to implement this particular law. Same; Same; Same; Same; Although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving infrastructure projects, the prohibition extends only to the issuance of injunctions or restraining orders against administrative acts in controversies involving facts or the exercise of discretion in technical cases.While its sole provision would appear to encompass all cases involving the implementation of projects and contracts on

infrastructure, natural resource development and public utilities, this rule, however, is not absolute as there are actually instances when Presidential Decree No. 1818 should not find application. In a spate of cases, this Court declared that although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving infrastructure projects, the prohibition extends only to the issuance of injunctions or restraining orders against administrative acts in controversies involving facts or the exercise of discretion in technical cases. On issues clearly outside this dimension and involving questions of law, this Court declared that courts could not be prevented from exercising their power to restrain or prohibit administrative acts. Same; Same; Same; Same; For a writ of preliminary injunction to be issued, the Rules do not require that the act complained of be in violation of the rights of the applicantindeed, what the Rules require is that the act complained of be probably in violation of the rights of the applicant.For a writ of preliminary injunction to be issued, the Rules do not require that the act complained of be in violation of the rights of the applicant. Indeed, what the Rules require is that the act complained of be probably in violation of the rights of the applicant. Under the Rules of Court, probability is enough basis for injunction to issue as a provisional remedy, which is different from injunction as a main action where one needs to establish absolute certainty as basis for a final and permanent injunction. 168

168 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation Same; Same; Same; Same; What Presidential Decree No. 1818 aims to avert is the untimely frustration of government infrastructure projects, particularly by provisional remedies, to the detriment of the greater good by disrupting the pursuit of essential government projects or frustrate the economic development effort of the nation.What Presidential Decree No. 1818 aims to avert is the untimely frustration of government infrastructure projects, particularly by provisional remedies, to the detriment of the greater good by disrupting the pursuit of essential government projects or frustrate the economic development effort of the nation. Presidential Decree No. 1818, however, was not meant to

be a blanket prohibition so as to disregard the fundamental right to health, safety and well-being of a community guaranteed by the fundamental law of the land. PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Saguisag & Associates for petitioners. The Solicitor General for respondent. CHICO-NAZARIO, J.:

Although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving infrastructure projects, the prohibition extends only to the issuance of injunctions or restraining orders against administrative acts in controversies involving facts or the exercise of discretion in technical cases. On issues clearly outside this dimension and involving questions of law, this Court declared that courts could not be prevented from exercising their power to restrain or prohibit administrative acts.1 In such cases, let the hammer fall and let it fall hard. _______________

1 Zamora v. Caballero, G.R. No. 147767, 14 January 2004, 419 SCRA 384, 392, citing Malaga v. Penachos, Jr., G.R. No. 86695, 3 September 1992, 213 SCRA 516, 523-524. 169

VOL. 485, MARCH 23, 2006 169 Hernandez vs. National Power Corporation

With health risks linked to exposure to electromagnetic radiation as their battle cry, petitioners, all residents of Dasmarias Village, are clamoring for the reversal of the decision2 dated 3 May 2000 of the Court of Appeals in CA-G.R. SP No. 57849 as well as the resolution dated 27 September 2000, denying their motion for reconsideration. The assailed decision3 of the Court of Appeals reversed the order of the Regional Trial Court of Makati, issuing a writ of preliminary injunction against respondent National Power Corporation (NAPOCOR) to stay the latter from energizing and transmitting high voltage electric current through its cables erected from Sucat, Paraaque to Araneta Ave., Quezon City. But, first, the facts: Sometime in 1996, NAPOCOR began the construction of 29 decagon-shaped steel poles or towers with a height of 53.4 meters to support overhead high tension cables in connection with its 230 Kilovolt Sucat-Araneta-Balintawak Power Transmission Project. Said transmission line passes through the Sergio Osmea, Sr. Highway (South Superhighway), the perimeter of Fort Bonifacio, and Dasmarias Village proximate to Tamarind Road, where petitioners homes are. Said project later proved to be petitioners bane of existence. Alarmed by the sight of the towering steel towers, petitioners scoured the internet on the possible adverse effects that such a structure could cause to their health and well-being. Petitioners got hold of published articles and studies linking the incidence of a fecund of illnesses to exposure to electromagnetic fields. These illnesses range from cancer to leukemia. _______________

2 Penned by Associate Justice Rodrigo V. Cosico with Associate Justices Godardo A. Jacinto and Wenceslao I. Agnir, Jr., concurring. Rollo, pp. 32-41. 3 Rollo, pp. 40-41. 170

170

SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation Petitioners left no stones unturned to address their malady. They aired this growing concern to the NAPOCOR, which conducted a series of meetings with them. NAPOCOR received flak from Representative Francis Joseph G. Escudero, who in his Privilege Speech dated 10 May 1999, denounced the cavalier manner with which NAPOCOR ignored safety and consultation requirements in the questioned project. Petitioners brought their woes to the attention of Rep. Arnulfo Fuentebella, Chairman of the House Committee on Energy, wherein NAPOCOR was asked to shed light on the petitioners problem. In a letter dated 8 November 1999, NAPOCOR President Federico Puno stated that NAPOCOR was still in the process of coming up with a win-win solution to the concerns of the Dasmarias Village and Forbes Park residents.4 In a letter dated 10 August 1999 addressed to Congressman Arnulfo P. Fuentebella, NAPOCORs President wrote: We have discussed the matter with the Dasmarias and Forbes residents and we have come up with four (4) options on how to address the problem, to wit: Option Cost Option 1: Transfer the line to Lawton Avenue (proposal of Dasmarias/Forbes) P 111.84 million Option 2: Maintain 12 meters distance along the village P 77.60 million Option 3: Construct an undergroundline P 482.00 million

Option 4: Reroute along C-5 and South Luzon Expressway (combination of overhead and underground)5 P 1,018.83 million _______________

4 Id., pp. 71-74. 5 Id., pp. 63-64. 171

VOL. 485, MARCH 23, 2006 171 Hernandez vs. National Power Corporation Negotiations between petitioners and the NAPOCOR reached an impass, with petitioners vying for the relocation of the transmission lines to Fort Bonifacio on one hand, and the NAPOCOR insisting on a 12-meter easement widening, on the other.6 Thus, petitioners, on 9 March 2000 filed a Complaint7 for Damages with Prayer for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary Injunction against NAPOCOR. Harping on the hazardous effects of exposure to electromagnetic radiation to the health and safety to themselves and their families, petitioners, through the instant case, sought what they had failed to achieve through amicable means with NAPOCOR and prayed, inter alia, for damages and the relocation of the transmission lines to Lawton Avenue, Fort Bonifacio. On 13 March 2000, Judge Francisco B. Ibay issued an order8 in Civil Case No. 00-352, which temporarily restrained the respondent from energizing and transmitting high voltage electric current through the said project. The pertinent portion of the said order reads:

Acting on the plaintiffs Urgent Omnibus Motion, it appearing that the subject area will be energized by midnight tonight based on a report taken from Representative Joker P. Arroyo by plaintiffs counsel, so as not to render moot and academic the instant case, as prayed for, defendant National Power Corporation is ordered to maintain the status quo and/or be enjoined from energizing and transmitting high voltage electric current through its cables for forty eight (48) hours starting 4 oclock in the afternoon today and ending 4 oclock in the afternoon of 15 March 2000.9 _______________

6 Id., pp. 64-67. 7 Id., pp. 42-55. 8 Id., p. 79. 9 Id. 172

172 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation By order10 of 15 March 2000, the trial court extended the restraining order for 18 more days. NAPOCOR filed a Petition for Certiorari with Prayer for Temporary Restraining Order and Preliminary Injunction with the Court of Appeals assailing the above order by the trial court. Alluding to Presidential Decree No. 1818 (1981), Prohibiting Courts from Issuing Restraining Orders or Preliminary Injunctions in Cases Involving Infrastructure and Natural Resource Development Projects of, and Public Utilities Operated by, the Government, particularly Sec. 1, NAPOCOR stalwartly sought the dismissal of the case on the ground of lack jurisdiction. Presidential Decree No. 1818 provides: Section 1. No Court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction or preliminary mandatory injunction

in any case, dispute, or controversy involving an infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among other public utilities for transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with or continuing the execution or implementation of any such project, or the operation of such public utility or pursuing any lawful activity necessary for such execution, implementation or operation. In the interregnum, by order dated 3 April 2000, the trial court ordered the issuance of a writ of preliminary injunction against NAPOCOR.11 The trial court articulated that an injunction was necessary to stay respondent NAPOCORs activation of its power lines due to the possible health risks posed to the petitioners. Asserting its jurisdiction over the case, the trial court was of the view that Presidential Decree No. 1818 and jurisprudence proscribing injunctions against infrastruc_______________

10 Id., p. 80. 11 Id., pp. 81-85. 173

VOL. 485, MARCH 23, 2006 173 Hernandez vs. National Power Corporation ture projects do not find application in the case at bar because of the health risks involved. The trial court, thus, enjoined the NAPOCOR from further preparing and installing high voltage cables to the steel pylons erected near petitioners homes and from energizing and transmitting high voltage electric current through said cables while the case is pending final adjudication, upon posting of the bond amounting to P5,000,000.00 executed to the effect that petitioners will pay all

the damages the NAPOCOR may sustain by reason of the injunction if the Court should finally decide that the petitioners are not entitled thereto.12 In light of the foregoing order of the trial court, the petition which NAPOCOR filed with the Court of Appeals was later amended to include the prayer for the nullification and injunction of the Order dated 3 April 2000 of the trial court. In the challenged decision of 3 May 2000, the Court of Appeals reversed the trial courts order, with the following fallo: WHEREFORE, premises considered, the instant petition for certiorari is hereby GRANTED. The assailed orders of the respondent court, dated March 13, 2000 and April 3, 2000, are hereby REVERSED and SET ASIDE.13 In the Court of Appeals rationale, the proscription on injunctions against infrastructure projects of the government is clearly mandated by the abovequoted Section 1 of Presidential Decree No. 1818, as reiterated by the Supreme Court in its Circulars No. 2-91 and No. 13-93, dated 15 March 1991 and 5 March 1993, respectively. As their motion for reconsideration was met with similar lack of success, petitioners, in a last attempt at vindication, filed the present petition for review on the following arguments: _______________

12 Id., p. 85. 13 Id., p. 37. 174

174 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation I.

TEMPORARY RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS WERE PURPOSELY DESIGNED TO ADDRESS MATTERS OF EXTREME URGENCY WHERE THERE IS PROBABILITY OF GRAVE INJUSTICE AND IRREPARABLE INJURY.14 II.

THE RULE ON PRELIMINARY INJUNCTION MERELY UNLESS RESTRAINED, THE ACT COMPLAINED OF WILL INJUSTICE TO THE APPLICANT OR PROBABLY VIOLATE TENDS TO RENDER THE JUDGMENT INEFFECTUAL.15 original.)

REQUIRES THAT PROBABLY WORK HIS RIGHTS AND (Emphasis in the

Fundamental to the resolution of the instant petition is the issue of whether or not the trial court may issue a temporary restraining order and preliminary injunction to enjoin the construction and operation of the 29 decagon-shaped steel poles or towers by the NAPOCOR, notwithstanding Presidential Decree No. 1818. Petitioners clutch on their stand that Presidential Decree No. 1818 could not be construed to apply to cases of extreme urgency as in the present case when no less than the rights of the petitioners to health and safety hangs on the balance. We find the petition to be imbued with merit. Presidential Decree No. 1818 was issued on 16 January 1981, prohibiting judges from issuing restraining orders against government infrastructure projects. In part, the decree says, No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction or preliminary order, preliminary mandatory injunction in any case, dispute or controversy involving an infrastructure project. Realizing the importance of this decree, this Tribunal had issued different circulars to implement this particular law. _______________

14 Id., p. 18. 15 Id., p. 20.

175

VOL. 485, MARCH 23, 2006 175 Hernandez vs. National Power Corporation Presidential Decree No. 181816 prohibits courts from issu_______________

16 The amendatory law of P.D. 1818 is Republic Act No. 8975, An Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects by Prohibiting the Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions, or Preliminary Mandatory Injunctions, Providing Penalties for Violation Thereof, and for Other Purposes, approved on 7 November 2000. Pertinent provisions of the Act read as follows: SEC. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions.No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the government's direction, to restrain, prohibit or compel the following acts: (a) Acquisition, clearance and development of the right-of-way and/or site or location of any national government project; (b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof; (c) Commencement, prosecution, execution, implementation, operation of any such contract or project; (d) Termination or rescission of any such contract/project; and (e) The undertaking or authorization of any other lawful activity necessary for such contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought. 176

176 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation ing injunctions against government infrastructure projects. In Garcia v. Burgos,17 Presidential Decree No. 1818 was held to prohibit courts from issuing an injunction against any infrastructure project in order not to disrupt or hamper the pursuit of essential government projects or frustrate the economic development effort of the nation. While its sole provision would appear to encompass all cases involving the implementation of projects and contracts on infrastructure, natural resource development and public utilities, this rule, however, is not absolute as there are actually instances when Presidential Decree No. 1818 should not find application. In a spate of cases, this Court declared that although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving infrastructure projects, the prohibition extends only to the issuance of injunctions or restraining orders against administrative acts in controversies involving facts or the exercise of discretion in technical cases. On issues clearly _______________

If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same,

without prejudice to any liability that the guilty party may incur under existing laws. SEC. 4. Nullity of Writs and Orders.Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and effect. SEC. 5. Designation of Regional Trial Courts.The Supreme Court may designate regional trial courts to act as commissioners with the sole function of receiving facts of the case involving acquisition, clearance and development of right-of-way for government infrastructure projects. The designated regional trial court shall within thirty (30) days from the date of receipt of the referral, forward its findings of facts to the Supreme Court for appropriate action. x x x x (Emphasis supplied) 17 353 Phil. 740, 743; 291 SCRA 546, 571 (1998). 177

VOL. 485, MARCH 23, 2006 177 Hernandez vs. National Power Corporation outside this dimension and involving questions of law, this Court declared that courts could not be prevented from exercising their power to restrain or prohibit administrative acts.18 In the case at bar, petitioners sought the issuance of a preliminary injunction on the ground that the NAPOCOR Project impinged on their right to health as enshrined in Article II, Section 15 of the 1987 Constitution, which provides: Sec. 15. The State shall protect and promote the right to health of the people and instill consciousness among them. To boot, petitioners, moreover, harp on respondents failure to conduct prior consultation with them, as the community affected by the project, in stark violation of Section 27 of the Local Government Code which provides: no project or program shall be implemented by government authorities unless the consultations mentioned are complied with, and prior approval of the Sanggunian concerned is observed.

From the foregoing, whether there is a violation of petitioners constitutionally protected right to health and whether respondent NAPOCOR had indeed violated the Local Government Code provision on prior consultation with the affected communities are veritable questions of law that invested the trial court with jurisdiction to issue a TRO and subsequently, a preliminary injunction. As such, these questions of law divest the case from the protective mantle of Presidential Decree No. 1818. Moreover, the issuance by the trial court of a preliminary injunction finds legal support in Section 3 of Rule 58 of the Rules of Court which provides: _______________

18 Zamora v. Caballero, G.R. No. 147767, 14 January 2004, 419 SCRA 384, 392; Malaga v. Penachos, supra note 1; G & S Transport Corporation v. Court of Appeals, 432 Phil. 7, 22; 382 SCRA 262, 277 (2002). 178

178 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation Sec. 3. Grounds for issuance of preliminary injunction.A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the

action or proceeding, and tending to render the judgment ineffectual. (3a) (Emphasis supplied.) The rule on preliminary injunction merely requires that unless restrained, the act complained of will probably violate his rights and tend to render the judgment ineffectual. Here, there is adequate evidence on record to justify the conclusion that the project of NAPOCOR probably imperils the health and safety of the petitioners so as to justify the issuance by the trial court of a writ of preliminary injunction. Petitioners adduced in evidence copies of studies linking the incidence of illnesses such as cancer and leukemia to exposure to electromagnetic fields. The records bear out, to boot, a copy of a brochure of NAPOCOR regarding its Quezon Power Project from which will be supplying NAPOCOR with the power which will pass through the towers subject of the controversy. The NAPOCOR brochure provides that because of the danger concomitant with high voltage power, Philippine laws mandate that the power lines should be located within safe distances from residences. And the Quezon Power Project mandates an easement of 20 meters to the right and 20 meters to the left which falls short of the 12-meter easement that NAPOCOR was proposing to petitioners. 179

VOL. 485, MARCH 23, 2006 179 Hernandez vs. National Power Corporation Likewise on record, are copies of letters of NAPOCOR President Federico Puno to Rep. Arnulfo Fuentebella, Chairman of the House Committee on Energy, stating updates on the negotiations being undertaken by the NAPOCOR and the Dasmarias Village and Forbes Park residents. Also on file is the Privilege Speech dated 10 May 1999 of Representative Francis Joseph G. Escudero, who denounced the cavalier manner with which Napocor ignored safety and consultation requirements in the questioned project. With a member of Congress denouncing the subject project of NAPOCOR because of the very same health and safety ills that petitioners now hew to in

this petition, and with documents on record to show that NAPOCOR made representations to petitioners that they are looking into the possibility of relocating the project, added to the fact that there had been series of negotiations and meetings between petitioners and NAPOCOR as well as related agencies, there is ample indicia to suggest to the mind of the court that the health concerns of the petitioners are, at the very least, far from imaginary. Indeed, if there is no cause for concern, NAPOCOR would not have been stirred to come up with options to address the woes of petitioners, nor would Congressman Escudero have fired away those strong words of censure, assailing what to Congressman Escudero smacks of a cavalier manner by which the NAPOCOR has responded to earnest pleas for a review of its practice of installing massive pylons supporting high tension cables in densely populated areas.19 True, the issue of whether or not the transmission lines are safe is essentially evidentiary in nature, and pertains to the very merits of the action below. In fact, petitioners recognize that the conclusiveness of their life, health and safety concerns still needs to be proved in the main case below and they are prepared to do so especially in the light of some studies cited by respondent that yield contrary results in a disputed _______________

19 Rollo, pp. 87-91. 180

180 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation subject. Despite the parties conflicting results of studies made on the issue, the possibility that the exposure to electromagnetic radiation causes cancer and other disorders is still, indeed, within the realm of scientific scale of probability.

Equally important, we take judicial notice that the area alluded to as location of the NAPOCOR project is a fragile zone being proximate to local earthquake faults, particularly the Marikina fault, among other zones. This is not to mention the risks of falling structures caused by killer tornadoes and super typhoons, the Philippines, especially Central Luzon, being situated along the typhoon belt. Moreover, the Local Government Code, requires conference with the affected communities of a government project. NAPOCOR, palpably, made a shortcut to this requirement. In fact, there appears a lack of exhaustive feasibility studies on NAPOCORs part before making a go with the project on hand; otherwise, it should have anticipated the legal labyrinth it is now caught in. These are facts, which the trial court could not ignore, and form as sufficient basis to engender the cloud of doubt that the NAPOCOR project could, indeed, endanger the lives of the petitioners. A preliminary injunction is likewise justified prior to a final determination of the issues of whether or not NAPOCOR ignored safety and consultation requirements in the questioned project. Indeed, the court could, nay should, grant the writ of preliminary injunction if the purpose of the other party is to shield a wrongdoing. A ruling to the contrary would amount to an erosion of judicial discretion. After all, for a writ of preliminary injunction to be issued, the Rules do not require that the act complained of be in violation of the rights of the applicant. Indeed, what the Rules require is that the act complained of be probably in violation of the rights of the applicant. Under the Rules of Court, probability is enough basis for injunction to issue as a provisional remedy, which is different from injunction as a main action 181

VOL. 485, MARCH 23, 2006 181 Hernandez vs. National Power Corporation where one needs to establish absolute certainty as basis for a final and permanent injunction.

Pending the final determination of the trial court on the main case for damages, of whether or not the NAPOCOR Project infringes on petitioners substantive right to health and pending determination of the question of whether there was non-observance of the prior-consultation proviso under the Local Government Code, it is prudent to preserve the status quo. In Phil. Ports Authority v. Cipres Stevedoring & Arrastre, Inc.,20 we held: A preliminary injunction is an order granted at any stage of an action prior to judgment of final order, requiring a party, court, agency, or person to refrain from a particular act or acts. It is a preservative remedy to ensure the protection of a partys substantive rights or interests pending the final judgment in the principal action. A plea for an injunctive writ lies upon the existence of a claimed emergency or extraordinary situation which should be avoided for otherwise, the outcome of a litigation would be useless as far as the party applying for the writ is concerned. At times referred to as the Strong Arm of Equity, we have consistently ruled that there is no power the exercise of which is more delicate and which calls for greater circumspection than the issuance of an injunction. It should only be extended in cases of great injury where courts of law cannot afford an adequate or commensurate remedy in damages; in cases of extreme urgency; where the right is very clear; where considerations of relative inconvenience bear strongly in complainants favor; where there is a willful and unlawful invasion of plaintiffs right against his protest and remonstrance, the injury being a continuing one, and where the effect of the mandatory injunction is rather to reestablish and maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted by the defendant, than to establish a new relation. (Emphasis supplied.) What is more, contrary to respondents assertion, there is not a single syllable in the circulars issued by this Court en_______________

20 G.R. No. 145742, 14 July 2005, 463 SCRA 358, 373-374. 182

182

SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation joining the observance of Presidential Decree No. 1818, which altogether and absolutely, ties the hands of the courts from issuing a writ of preliminary injunction. What Circular 2-9121 dated 15 March 1991 seeks to enjoin is the indiscriminate issuance of court injunctions. The same holds for Circular 139322 dated 5 March 1993 and Circular 68-94.23 And, in Circular No. 7-99, judges are enjoined to observe utmost caution, prudence and judiciousness in the issuance of temporary restraining order and in the grant of writs of preliminary injunction to avoid any suspicion that its issuance or grant was for consideration other than the strict merits of the case.24 _______________

21 CIRCULAR NO. 2-91

xxxx The Office of the Court Administration has been continuously receiving reports and/or complaints against Judges who are indiscriminately issuing court injunctions against the National Power Corporation in gross violation of Sec. 1 of P.D. 1818. x x x x (Emphasis supplied) 22 CIRCULAR NO. 13-93

The Office of the Court Administrator has been continuously receiving reports and/or complaints against indiscriminate issuance of restraining orders and court injunctions against the National Power Corporation and other government public utility firms in gross violation of Sec. 1 of P.D. 1818. x x x x (Emphasis supplied)

23 CIRCULAR NO. 68-94

xxxx In order to obviate complaints against the indiscriminate issuance of restraining orders and court injunctions against government public utilities and infrastructure projects in gross violation of the aforesaid Presidential Decree, the provision of Circular No. 13-93 issued on March 5, 1993 is hereby reiterated for your strict compliance. x x x x (Emphasis supplied) 24 ADMINISTRATIVE CIRCULAR NO. 7-99

xxxx 183

VOL. 485, MARCH 23, 2006 183 Hernandez vs. National Power Corporation There is not a hint from the foregoing circulars suggesting an unbridled prohibition against the issuance of temporary restraining orders or preliminary injunctions. In sum, what Presidential Decree No. 1818 aims to avert is the untimely frustration of government infrastructure projects, particularly by provisional remedies, to the detriment of the greater good by disrupting the pursuit of essential government projects or frustrate the economic development effort of the nation. Presidential Decree No. 1818, however, was not meant to be a blanket prohibition so as to disregard the fundamental right to health, safety and well-being of a community guaranteed by the fundamental law of the land.25

Lest we be misconstrued, this decision does not undermine the purpose of the NAPOCOR project which is aimed towards the common good of the people. But, is the promotion of the general welfare at loggerheads with the preservation of the rule of law? We submit that it is not.26 In the present case, the far-reaching irreversible effects to human safety should be the primordial concerns over presumed economic benefits per se as alleged by the NAPOCOR. Not too long ago, the Court, in Metropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc.,27 upheld the validity of the writ of preliminary injunction _______________

Judges are thus enjoined to observe utmost caution, prudence and judiciousness in the issuance of TRO and in the grant of writs of preliminary injunction to avoid any suspicion that its issuance or grant was for consideration other than the strict merits of the case. x x x x (Emphasis supplied) 25 ARTICLE II, 1987 CONSTITUTION, Declaration of Principles and State Policies, Sec. 15. The State shall protect and promote the right to health of the people and instill consciousness among them. 26 Metropolitan Manila Development Authority v. Bel-Air Village Association, Inc., 385 Phil. 586, 622; 328 SCRA 836, 863 (2000). 27 Id., p. 599; p. 843. 184

184 SUPREME COURT REPORTS ANNOTATED Hernandez vs. National Power Corporation

issued by the Court of Appeals enjoining the implementation of the Metropolitan Manila Development Authoritys proposed action of opening of the Neptune Street to public vehicular traffic. We were categorical Not infrequently, the government is tempted to take legal shortcuts to solve urgent problems of the people. But even when government is armed with the best of intention, we cannot allow it to run roughshod over the rule of law. Again, we let the hammer fall and fall hard on the illegal attempt of the MMDA to open for public use a private road in a private subdivision. While we hold that the general welfare should be promoted, we stress that it should not be achieved at the expense of the rule of law.28 In hindsight, if, after trial, it turns out that the health-related fears that petitioners cleave on to have adequate confirmation in fact and in law, the questioned project of NAPOCOR then suffers from a paucity of purpose, no matter how noble the purpose may be. For what use will modernization serve if it proves to be a scourge on an individuals fundamental right, not just to health and safety, but, ostensibly, to life preservation itself, in all of its desired quality? WHEREFORE, the petition is granted. The decision dated 3 May 2000 of the Court of Appeals in CA-G.R. SP No. 57849 is REVERSED as well as the resolution dated 27 September 2000. The Order dated 3 April 2000 of the Regional Trial Court of Makati in Civil Case No. 00-352 is hereby REINSTATED. No pronouncement as to costs SO ORDERED. Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur. Petition granted, judgment and resolution reversed. _______________

28 Id., p. 597; p. 839. 185

VOL. 485, MARCH 23, 2006

185 Santos vs. People Notes.If the temporary restraining order was issued by respondent in his capacity as Executive Judge, the Temporary Restraining Order was good for 72 hours only. (Adao vs. Lorenzo, 316 SCRA 570 [1999]) Administrative Circular No. 20-95 provides for the procedure to be followed in the issuance of temporary restraining orders. (Borja vs. Salcedo, 412 SCRA 110 [2003]) o0o [Hernandez vs. National Power Corporation, 485 SCRA 166(2006)] G.R. No. 176657. September 1, 2010.* DEPARTMENT OF FOREIGN AFFAIRS and BANGKO SENTRAL NG PILIPINAS, petitioners, vs. HON. FRANCO T. FALCON, IN HIS CAPACITY AS THE PRESIDING JUDGE OF BRANCH 71 OF THE REGIONAL TRIAL COURT IN PASIG CITY and BCA INTERNATIONAL CORPORATION, respondents. Remedial Law; Actions; Hierarchy of Courts; Court has full discretionary power to take cognizance and assume jurisdiction of special civil actions for certiorari and mandamus filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petition.Although the direct filing of petitions for certiorari with the Supreme Court is discouraged when litigants may still resort to remedies with the lower courts, we have in the past overlooked the failure of a party to strictly adhere to the hierarchy of courts on highly meritorious grounds. Most recently, we relaxed the rule on court hierarchy in the case of Roque, Jr. v. Commission on Elections, 599 SCRA 69 (2009), wherein we held: The policy on the hierarchy of courts, which petitioners indeed failed to observe, is not an iron-clad rule. For indeed the Court has full discretionary power to take cognizance and assume jurisdiction of special civil actions for certiorari and mandamus filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petition. Same; Same; Same; The Court may suspend or even disregard rules when the demands of justice so require.In sum, BCA failed to successfully rebut the presumption that the official acts (of Mr. Custodio and Mr. Zuniga) were done in good faith and in the regular performance of official duty. Even assuming the verifications of the petition suffered from some defect, we have time and again

ruled that [t]he ends of justice are better served when cases are determined on the meritsafter all parties are given full opportunity to ventilate their causes and defensesrather than on technicality or _______________

* FIRST DIVISION. 645

VOL. 629, SEPTEMBER 1, 2010 645 Department of Foreign Affair vs. Falcon some procedural imperfections. In other words, the Court may suspend or even disregard rules when the demands of justice so require. Same; Injunction; Infrastructure Projects; National Government Projects; No court, aside from the Supreme Court, may enjoin a national government project unless the matter is one of extreme urgency involving a constitutional issue such that unless the act complained of is enjoined, grave injustice or irreparable injury would arise.It is indubitable that no court, aside from the Supreme Court, may enjoin a national government project unless the matter is one of extreme urgency involving a constitutional issue such that unless the act complained of is enjoined, grave injustice or irreparable injury would arise. Same; Same; Same; Definition of National Government Projects.(a) National government projects shall refer to all current and future national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and -controlled corporations, all projects covered by Republic Act No. 6975, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding.

Same; Same; Same; Private Sector Infrastructure or Development Projects; Meaning of.Under Section 2(a) of the BOT Law as amended by Republic Act No. 7718, private sector infrastructure or development projects are those normally financed and operated by the public sector but which will now be wholly or partly implemented by the private sector, including but not limited to, power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation, telecommunications, railroads and railways, transport systems, land reclamation projects, industrial estates or townships, housing, government buildings, tourism projects, markets, slaughterhouses, warehouses, solid waste management, information technology networks and database infrastructure, education and health facilities, sewerage, drainage, dredging, and other infrastructure and development projects as may be authorized by the appropriate agency. 646

646 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Same; Same; Same; Same; Definition of Infrastructure Projects under the Government Procurement Reform Act.Republic Act No. 9184, also known as the Government Procurement Reform Act, defines infrastructure projects in Section 5(k) thereof in this manner: (k) Infrastructure Projectsinclude the construction, improvement, rehabilitation, demolition, repair, restoration or maintenance of roads and bridges, railways, airports, seaports, communication facilities, civil works components of information technology projects, irrigation, flood control and drainage, water supply, sanitation, sewerage and solid waste management systems, shore protection, energy/power and electrification facilities, national buildings, school buildings, hospital buildings and other related construction projects of the government. Same; Same; Same; Evidence; Evidence adduced by both sides tended to show that the e-Passport Project was a procurement contract under Republic Act No. 9184.Taking into account the different treatment of information technology projects under the BOT Law and the Government Procurement Reform Act, petitioners contention the trial court had no jurisdiction to issue a writ of preliminary injunction in the instant case would have been correct if the e-

Passport Project was a project under the BOT Law as they represented to the trial court. However, petitioners presented no proof that the e-Passport Project was a BOT project. On the contrary, evidence adduced by both sides tended to show that the e-Passport Project was a procurement contract under Republic Act No. 9184. Same; Same; Same; Same; To be considered a service contract or related activity, petitioners must show that the e-Passport Project is an infrastructure project or necessarily related to an infrastructure project.Under Republic Act No. 8975, a service contract refers to infrastructure contracts entered into by any department, office or agency of the national government with private entities and nongovernment organizations for services related or incidental to the functions and operations of the department, office or agency concerned. On the other hand, the phrase other related and necessary activities obviously refers to activities related to a government infrastructure, engineering works, service contract or project under the BOT Law. In other words, to be considered a service contract or related activity, petitioners must show that the e-Passport Project is an infrastructure project or necessarily related to an infrastructure 647

VOL. 629, SEPTEMBER 1, 2010 647 Department of Foreign Affair vs. Falcon project. This, petitioners failed to do for they saw fit not to present any evidence on the details of the e-Passport Project before the trial court and this Court. There is nothing on record to indicate that the e-Passport Project has a civil works component or is necessarily related to an infrastructure project. Same; Same; Same; The trial court had jurisdiction to issue a writ of preliminary injunction against the e-Passport Project.Republic Act No. 9285 is a general law applicable to all matters and controversies to be resolved through alternative dispute resolution methods. This law allows a Regional Trial Court to grant interim or provisional relief, including preliminary injunction, to parties in an arbitration case prior to the constitution of the arbitral tribunal. This general statute, however, must give way to a special law governing national government projects, Republic Act No. 8975 which prohibits

courts, except the Supreme Court, from issuing TROs and writs of preliminary injunction in cases involving national government projects. However, as discussed above, the prohibition in Republic Act No. 8975 is inoperative in this case, since petitioners failed to prove that the e-Passport Project is national government project as defined therein. Thus, the trial court had jurisdiction to issue a writ of preliminary injunction against the e-Passport Project. Same; Same; To be entitled to injunctive relief the party seeking such relief must be able to show grave, irreparable injury that is not capable of compensation.Time and again, this Court has held that to be entitled to injunctive relief the party seeking such relief must be able to show grave, irreparable injury that is not capable of compensation. Same; Same; An injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation.We reiterated this point in Transfield Philippines, Inc. v. Luzon Hydro Corporation, 443 SCRA 307 (2004), where we likewise opined: Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right. It must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent 648

648 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon and paramount necessity for the writ to prevent serious damage. Moreover, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. Same; Damages; When an injury considered irreparable.An injury is considered irreparable if it is of such constant and frequent recurrence that no fair and reasonable redress can be had therefor in a court of law, or where there is no standard by which their amount can be measured with reasonable

accuracy, that is, it is not susceptible of mathematical computation. It is considered irreparable injury when it cannot be adequately compensated in damages due to the nature of the injury itself or the nature of the right or property injured or when there exists no certain pecuniary standard for the measurement of damages. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition. The facts are stated in the opinion of the Court. The Solicitor General for petitioner. Castillo, Laman, Tan, Pantaleon & San Jose for respondent BCA. SEDALAW collaborating counsel for respondent BCA. LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction filed by petitioners Department of Foreign Affairs (DFA) and Bangko Sentral ng Pilipinas (BSP). Petitioners pray that the Court declare as null and void the Order1 dated February 14, 2007 of respondent Judge Franco _______________

1 Rollo, pp. 84-92. 649

VOL. 629, SEPTEMBER 1, 2010 649 Department of Foreign Affair vs. Falcon T. Falcon (Judge Falcon) in Civil Case No. 71079, which granted the application for preliminary injunction filed by respondent BCA International Corporation (BCA). Likewise, petitioners seek to prevent respondent Judge Falcon from implementing the corresponding Writ of Preliminary Injunction dated February 23, 20072 issued pursuant to the aforesaid Order.

The facts of this case, as culled from the records, are as follows: Being a member state of the International Civil Aviation Organization (ICAO),3 the Philippines has to comply with the commitments and standards set forth in ICAO Document No. 93034 which requires the ICAO member states to issue machine readable travel documents (MRTDs)5 by April 2010. _______________

2 Id., at p. 93. 3 The International Civil Aviation Organization (ICAO) is a specialized agency of the United Nations which was established on December 7, 1944 by 52 nations whose aim was to assure the safe, orderly and economic development of international air transport. ICAO was created with the signing in Chicago of the Convention on International Civil Aviation. ICAO is the permanent body charged with the administration of the principles laid out in the Convention. (see http://www.icao.int/icao/en/m_about.html.) 4 ICAOs mandate to develop MRTDs is provided by Articles 22, 23 and 37 of the Chicago Convention which oblige Contracting States to develop and adopt international standards for customs, immigration and other procedures to facilitate the border-crossing processes involved in international air transport. In order to address the clearance of increased passengers volumes that came with the emergence of wide body aircraft, ICAO took the initiative and published the first edition of Document No. 9303 in 1980. (http://www2.icao.int/ en/MRTD/Pages/Overview.aspx.) 5 A Machine Readable Travel Document (MRTD) is an international travel document (e.g., a passport or visa) containing eye- and machine-readable data. Each type of MRTD contains, in a standard format, the holders identification details, including a photograph or digital image, with mandatory identity elements reflected in a two650

650

SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Thus, in line with the DFAs mandate to improve the passport and visa issuance system, as well as the storage and retrieval of its related application records, and pursuant to our governments ICAO commitments, the DFA secured the approval of the President of the Philippines, as Chairman of the Board of the National Economic and Development Authority (NEDA), for the implementation of the Machine Readable Passport and Visa Project (the MRP/V Project) under the Build-Operate-and-Transfer (BOT) scheme, provided for by Republic Act No. 6957, as amended by Republic Act No. 7718 (the BOT Law), and its Implementing Rules and Regulations (IRR). Thus, a Pre-qualification, Bids and Awards Committee (PBAC) published an invitation to pre-qualify and bid for the supply of the needed machine readable passports and visas, and conducted the public bidding for the MRP/V Project on January 10, 2000. Several bidders responded and BCA was among those that pre-qualified and submitted its technical and financial proposals. On June 29, 2000, the PBAC found BCAs bid to be the sole complying bid; hence, it permitted the DFA to engage in direct negotiations with BCA. On even date, the PBAC recommended to the DFA Secretary the award of the MRP/V Project to BCA on a BOT arrangement. In compliance with the Notice of Award dated September 29, 2000 and Section 11.3, Rule 11 of the IRR of the BOT Law,6 BCA incorporated a project company, the Philippine _______________

line machine readable zone (MRZ) printed in Optical Character Recognition-B (OCR-B) style. (Id.)

6 The relevant portion of Section 11.3, IRR of the BOT Law, states: Sec. 11.3. Notice of Award.The Notice of Award shall indicate, among others, that the awardee must submit within thirty (30) calendar days from official receipt of the Notice of Award the following: (a) prescribed performance security;

(b) proof of commitment of equity contribution Agency/LGU and subject to current monetary 651

as

specified

by

the

VOL. 629, SEPTEMBER 1, 2010 651 Department of Foreign Affair vs. Falcon Passport Corporation (PPC) to undertake and implement the MRP/V Project. On February 8, 2001, a Build-Operate-Transfer Agreement7 (BOT Agreement) between the DFA and PPC was signed by DFA Acting Secretary Lauro L. Baja, Jr. and PPC President Bonifacio Sumbilla. Under the BOT Agreement, the MRP/V Project was defined as follows: Section 1.02 MRP/V Projectrefers to all the activities and services undertaken in the fulfillment of the Machine Readable Passport and Visa Project as defined in the Request for Proposals (RFP), a copy of which is hereto attached as Annex A, including but not limited to project financing, systems development, installation and maintenance in the Philippines and Foreign Service Posts (FSPs), training of DFA personnel, provision of all project consumables (related to the production of passports and visas, such as printer supplies, etc.), scanning of application and citizenship documents, creation of data bases, issuance of machine readable passports and visas, and site preparation in the Central Facility and Regional Consular Offices (RCOs) nationwide.8 On April 5, 2002, former DFA Secretary Teofisto T. Guingona and Bonifacio Sumbilla, this time as BCA President, signed an Amended BOT Agreement9 in order to reflect the change in the designation of the parties and to harmonize _______________

rules and regulations, and indications of financing resources; (c) in the case of a joint venture/consortium, the agreement indicating that the members are jointly, severally and solidarily liable for the obligations of the project proponent under the contract; or

(d) in case a project company is formed, proof of registration in accordance with Philippine laws. 7 Rollo, pp. 177-200. 8 Id., at p. 178. 9 Id., at pp. 201-226. 652

652 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Section 11.3 with Section 11.810 of the IRR of the BOT Law. The Amended BOT Agreement was entered into by the DFA and BCA with the conformity of PPC. The two BOT Agreements (the original version signed on February 8, 2001 and the amended version signed April 5, 2002) contain substantially the same provisions except for seven additional paragraphs in the whereas clauses and two new provisionsSection 9.05 on Performance and Warranty Securities and Section 20.15 on Miscellaneous Provisions. The two additional provisions are quoted below: Section 9.05. The PPC has posted in favor of the DFA the performance security required for Phase 1 of the MRP/V Project and shall be deemed, for all intents and purposes, to be full compliance by BCA with the provisions of this Article 9. xxxx Section 20.15. It is clearly and expressly understood that BCA may assign, cede and transfer all of its rights and obligations under this Amended BOT Agreement to PPC, as fully as if PPC is the original signatory to this Amended BOT Agreement, provided however that BCA shall nonetheless be jointly and severally liable with PPC for the performance of all the obligations and liabilities under this Amended BOT Agreement.11

Also modified in the Amended BOT Agreement was the Project Completion date of the MRP/V Project which set the completion of the implementation phase of the project within 18 to 23 months from the date of effectivity of the Amended BOT Agreement as opposed to the previous period found in the original BOT Agreement which set the completion within _______________

10 Section 11.8 of the IRR of the BOT Law provides that [t]he successful bidder should sign the contract within seven (7) calendar days from receipt of the advice of the Agency/LGU that all requirements for award, as provided for in Section 11.3 are fully complied with. 11 Rollo, pp. 214-224. 653

VOL. 629, SEPTEMBER 1, 2010 653 Department of Foreign Affair vs. Falcon 18 to 23 months from receipt of the NTP (Notice to Proceed) in accordance with the Project Master Plan. On April 12, 2002, an Assignment Agreement12 was executed by BCA and PPC, whereby BCA assigned and ceded its rights, title, interest and benefits arising from the Amended BOT Agreement to PPC. As set out in Article 8 of the original and the Amended BOT Agreement, the MRP/V Project was divided into six phases: Phase 1. Project Planning PhaseThe Project Proponent [BCA] shall prepare detailed plans and specifications in accordance with Annex A of this [Amended] BOT Agreement within three (3) months from issuance of the NTP (Notice to Proceed) [from the date of effectivity of this Amended BOT Agreement]. This phase shall be considered complete upon the review, acceptance and approval by the DFA of these plans and the resulting Master Plan, including the Master Schedule, the business process specifications, the acceptance criteria, among other plans.

xxxx The DFA must approve all detailed plans as a condition precedent to the issuance of the CA [Certificate of Acceptance] for Phase 1. Phase 2. Implementation of the MRP/V Project at the Central FacilityWithin six (6) months from issuance of the CA for Phase 1, the PROJECT PROPONENT [BCA] shall complete the implementation of the MRP/V Project in the DFA Central Facility, and establish the network design between the DFA Central Facility, the ten (10) RCOs [Regional Consular Offices] and the eighty (80) FSPs [Foreign Service Posts]. xxxx Phase 3. Implementation of the MRP/V Project at the Regional Consular OfficesThis phase represents the replication of the systems as approved from the Central Facility to the RCOs throughout the country, as identified in the RFP [Request for Pro_______________

12 Id., at pp. 227-232. 654

654 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon posal]. The approved systems are those implemented, evaluated, and finally approved by DFA as described in Phase 1. The Project Proponent [BCA] will be permitted to begin site preparation and the scanning and database building operations in all offices as soon as the plans are agreed upon and accepted. This includes site preparation and database building operations in these Phase-3 offices. Within six (6) months from issuance of CA for Phase 2, the Project Proponent [BCA] shall complete site preparation and implementation of the approved

systems in the ten (10) RCOs, including a fully functional network connection between all equipment at the Central Facility and the RCOs. Phase 4. Full Implementation, including all Foreign Service PostsWithin three (3) to eight (8) months from issuance of the CA for Phase-3, the Project Proponent [BCA] shall complete all preparations and fully implement the approved systems in the eighty (80) FSPs, including a fully functional network connection between all equipment at the Central Facility and the FSPs. Upon satisfactory completion of Phase 4, a CA shall be issued by the DFA. Phase 5. In Service PhaseOperation and maintenance of the complete MRP/V Facility to provide machine readable passports and visas in all designated locations around the world. Phase 6. Transition/TurnoverTransition/Turnover to the DFA of all operations and equipment, to include an orderly transfer of ownership of all hardware, application system software and its source code and/or licenses (subject to Section 5.02 [H]), peripherals, leasehold improvements, physical and computer security improvements, Automated Fingerprint Identification Systems, and all other MRP/V facilities shall commence at least six (6) months prior to the end of the [Amended] BOT Agreement. The transition will include the training of DFA personnel who will be taking over the responsibilities of system operation and maintenance from the Project Proponent [BCA]. The Project Proponent [BCA] shall bear all costs related to this transfer.13 (Words in brackets appear in the Amended BOT Agreement) _______________

13 Id., at pp. 187-189. 655

VOL. 629, SEPTEMBER 1, 2010 655 Department of Foreign Affair vs. Falcon

To place matters in the proper perspective, it should be pointed out that both the DFA and BCA impute breach of the Amended BOT Agreement against each other. According to the DFA, delays in the completion of the phases permeated the MRP/V Project due to the submission of deficient documents as well as intervening issues regarding BCA/PPCs supposed financial incapacity to fully implement the project. On the other hand, BCA contends that the DFA failed to perform its reciprocal obligation to issue to BCA a Certificate of Acceptance of Phase 1 within 14 working days of operation purportedly required by Section 14.04 of the Amended BOT Agreement. BCA bewailed that it took almost three years for the DFA to issue the said Certificate allegedly because every appointee to the position of DFA Secretary wanted to review the award of the project to BCA. BCA further alleged that it was the DFAs refusal to approve the location of the DFA Central Facility which prevented BCA from proceeding with Phase 2 of the MRP/V Project. Later, the DFA sought the opinion of the Department of Finance (DOF) and the Department of Justice (DOJ) regarding the appropriate legal actions in connection with BCAs alleged delays in the completion of the MRP/V Project. In a Letter dated February 21, 2005,14 the DOJ opined that the DFA should issue a final demand upon BCA to make good on its obligations, specifically on the warranties and responsibilities regarding the necessary capitalization and the required financing to carry out the MRP/V Project. The DOJ used as basis for said recommendation, the Letter dated April 19, 200415 of DOF Secretary Juanita Amatong to then DFA Secretary Delia Albert stating, among others, that BCA may not be able to infuse more capital into PPC to use for the completion of the MRP/V Project. _______________

14 Id., at pp. 234-237. 15 Id., at pp. 238-239. 656

656 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Thus, on February 22, 2005, DFA sent a letter16 to BCA, through its project company PPC, invoking BCAs financial warranty under Section 5.02(A) of the Amended BOT Agreement.17 The DFA required BCA to submit (a) proof of adequate capitalization (i.e., full or substantial payment of stock subscriptions); (b) a bank guarantee indicating the availability of a credit facility of P700 million; and (c) audited financial statements for the years 2001 to 2004. In reply to DFAs letter, BCA, through PPC, informed the former of its position that its financial capacity was already passed upon during the prequalification process and that the Amended BOT Agreement did not call for any additional financial requirements for the implementation of the MRP/V Project. Nonetheless, BCA submitted its financial statements for the years 2001 and 2002 and requested for additional time within which to comply with the other financial requirements which the DFA insisted on.18 According to the DFA, BCAs financial warranty is a continuing warranty which requires that it shall have the necessary capitalization to finance the MRP/V Project in its entirety and not on a per phase basis as BCA contends. Only upon sufficient proof of its financial capability to complete and implement the whole project will the DFAs obligation to choose and approve the location of its Central Facility arise. The DFA asserted that its approval of a Central Facility site was not ministerial and upon its review, BCAs proposed site for the Central Facility was purportedly unacceptable in _______________

16 Id., at p. 240; erroneously dated as February 22, 2004. 17 Section 5.02(A) of the Amended BOT Agreement provides: Section 5.02The BCA further warrants to the DFA that: A. It shall have the necessary capitalization and shall obtain the required financing to carry out the MRP/V Project in accordance with this amended BOT Agreement; x x x. (Rollo, p. 208.)

18 Rollo, pp. 241-243. 657

VOL. 629, SEPTEMBER 1, 2010 657 Department of Foreign Affair vs. Falcon terms of security and facilities. Moreover, the DFA allegedly received conflicting official letters and notices19 from BCA and PPC regarding the true ownership and control of PPC. The DFA implied that the disputes among the shareholders of PPC and between PPC and BCA appeared to be part of the reason for the hampered implementation of the MRP/V Project. BCA, in turn, submitted various letters and documents to prove its financial capability to complete the MRP/V Project.20 However, the DFA claimed these documents were unsatisfactory or of dubious authenticity. Then on August 1, 2005, BCA terminated its Assignment Agreement with PPC and notified the DFA that it would directly implement the MRP/V Project.21 BCA further claims that the termination of the Assignment Agreement was upon the instance, or with the conformity, of the DFA, a claim which the DFA disputed. On December 9, 2005, the DFA sent a Notice of Termination22 to BCA and PPC due to their alleged failure to submit proof of financial capability to complete the entire MRP/V Project in accordance with the financial warranty under Section 5.02(A) of the Amended BOT Agreement. The Notice states: After a careful evaluation and consideration of the matter, including the reasons cited in your letters dated March 3, May 3, and June 20, 2005, and upon the recommendation of the Office of the Solicitor General (OSG), the Department is of the view that your continuing default in complying with the requisite bank guarantee and/or credit facility, despite repeated notice and demand, is legally unjustified. In light of the foregoing considerations and upon the instruction of the Secretary of Foreign Affairs, the Department hereby _______________

19 Id., at pp. 252-255. 20 Id., at pp. 671-675. 21 Id., at p. 692. 22 Id., at pp. 256-257. 658

658 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon formally TERMINATE (sic) the Subject Amended BOT Agreement dated 5 April 2005 (sic)23 effective 09 December 2005. Further, and as a consequence of this termination, the Department formally DEMAND (sic) that you pay within ten (10) days from receipt hereof, liquidated damages equivalent to the corresponding performance security bond that you had posted for the MRP/V Project. Please be guided accordingly. On December 14, 2005, BCA sent a letter24 to the DFA demanding that it immediately reconsider and revoke its previous notice of termination, otherwise, BCA would be compelled to declare the DFA in default pursuant to the Amended BOT Agreement. When the DFA failed to respond to said letter, BCA issued its own Notice of Default dated December 22, 200525 against the DFA, stating that if the default is not remedied within 90 days, BCA will be constrained to terminate the MRP/V Project and hold the DFA liable for damages. BCAs request for mutual discussion under Section 19.01 of the Amended BOT Agreement26 was purportedly ignored by the DFA and left the dispute unresolved through amicable means within 90 days. Consequently, BCA filed its Request for Arbitration dated April 7, 200627 with the Philippine Dispute Resolution Center, Inc. (PDRCI), pursuant to Section 19.02 of the Amended BOT Agreement which provides: _______________

23 The Amended BOT Agreement was dated April 2, 2002 and not 2005. 24 Rollo, pp. 697-699. 25 Id., at pp. 258-259. 26 Section 19.01 of the Amended BOT Agreement provides: Section 19.01 Dispute SettlementAny dispute or controversy of any kind whatsoever between the DFA and the BCA (such dispute or controversy being referred to herein as a Dispute) which may arise out of or in connection with this Agreement, in the first instance shall be settled within ninety (90) days through amicable means, such as, but not limited to, mutual discussion. 27 Rollo, pp. 260-266. 659

VOL. 629, SEPTEMBER 1, 2010 659 Department of Foreign Affair vs. Falcon Section 19.02 Failure to Settle AmicablyIf the Dispute cannot be settled amicably within ninety (90) days by mutual discussion as contemplated under Section 19.01 herein, the Dispute shall be settled with finality by an arbitrage tribunal operating under International Law, hereinafter referred to as the Tribunal, under the UNCITRAL Arbitration Rules contained in Resolution 31/98 adopted by the United Nations General Assembly on December 15, 1976, and entitled Arbitration Rules on the United Nations Commission on the International Trade Law. The DFA and the BCA undertake to abide by and implement the arbitration award. The place of arbitration shall be Pasay City, Philippines, or such other place as may mutually be agreed upon by both parties. The arbitration proceeding shall be conducted in the English language.28 As alleged in BCAs Request for Arbitration, PDRCI is a non-stock, non-profit organization composed of independent arbitrators who operate under its own Administrative Guidelines and Rules of Arbitration as well as under the United Nations Commission on the International Trade Law (UNCITRAL) Model Law on

International Commercial Arbitration and other applicable laws and rules. According to BCA, PDRCI can act as an arbitration center from whose pool of accredited arbitrators both the DFA and BCA may select their own nominee to become a member of the arbitral tribunal which will render the arbitration award. BCAs Request for Arbitration filed with the PDRCI sought the following reliefs: 1. A judgment nullifying and setting aside the Notice of Termination dated December 9, 2005 of Respondent [DFA], including its demand to Claimant [BCA] to pay liquidated damages equivalent to the corresponding performance security bond posted by Claimant [BCA]; 2. A judgment (a) confirming the Notice of Default dated December 22, 2005 issued by Claimant [BCA] to Respondent [DFA]; and (b) ordering Respondent [DFA] to perform its obligation under the Amended BOT Agreement dated April 5, 2002 by approving the _______________

28 Id., at p. 222. 660

660 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon site of the Central Facility at the Star Mall Complex on Shaw Boulevard, Mandaluyong City, within five days from receipt of the Arbitral Award; and 3. A judgment ordering respondent [DFA] to pay damages to Claimant [BCA], reasonably estimated at P50,000,000.00 as of this date, representing lost business opportunities; financing fees, costs and commissions; travel expenses; legal fees and expenses; and costs of arbitration, including the fees of the arbitrator/s.29 PDRCI, through a letter dated April 26, 2006,30 invited the DFA to submit its Answer to the Request for Arbitration within 30 days from receipt of said letter

and also requested both the DFA and BCA to nominate their chosen arbitrator within the same period of time. Initially, the DFA, through a letter dated May 22, 2006,31 requested for an extension of time to file its answer, without prejudice to jurisdictional and other defenses and objections available to it under the law. Subsequently, however, in a letter dated May 29, 2006,32 the DFA declined the request for arbitration before the PDRCI. While it expressed its willingness to resort to arbitration, the DFA pointed out that under Section 19.02 of the Amended BOT Agreement, there is no mention of a specific body or institution that was previously authorized by the parties to settle their dispute. The DFA further claimed that the arbitration of the dispute should be had before an ad hoc arbitration body, and not before the PDRCI which has as its accredited arbitrators, two of BCAs counsels of record. Likewise, the DFA insisted that PPC, allegedly an indispensable party in the instant case, should also participate in the arbitration. _______________

29 Id., at p. 266; page 7 of the Request for Arbitration. 30 Id., at pp. 711-740. 31 Id., at pp. 741-742. 32 Id., at pp. 743-745. 661

VOL. 629, SEPTEMBER 1, 2010 661 Department of Foreign Affair vs. Falcon The DFA then sought the opinion of the DOJ on the Notice of Termination dated December 9, 2005 that it sent to BCA with regard to the MRP/V Project. In DOJ Opinion No. 35 (2006) dated May 31, 2006,33 the DOJ concurred with the steps taken by the DFA, stating that there was basis in law and in fact for the termination of the MRP/V Project. Moreover, the DOJ recommended the

immediate implementation of the project (presumably by a different contractor) at the soonest possible time. Thereafter, the DFA and the BSP entered into a Memorandum of Agreement for the latter to provide the former passports compliant with international standards. The BSP then solicited bids for the supply, delivery, installation and commissioning of a system for the production of Electronic Passport Booklets or e-Passports.34 For BCA, the BSPs invitation to bid for the supply and purchase of e-Passports (the e-Passport Project) would only further delay the arbitration it requested from the DFA. Moreover, this new e-Passport Project by the BSP and the DFA would render BCAs remedies moot inasmuch as the e-Passport Project would then be replacing the MRP/V Project which BCA was carrying out for the DFA. Thus, BCA filed a Petition for Interim Relief35 under Section 28 of the Alternative Dispute Resolution Act of 2004 (R.A. No. 9285),36 with the Regional Trial Court (RTC) of _______________

33 Id., at pp. 268-269. 34 Id., at pp. 273-275. 35 Id., at pp. 276-286. 36 Section 28. Grant of Interim Measure of Protection.(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral tribunal or to the extent that 662

662 SUPREME COURT REPORTS ANNOTATED

Department of Foreign Affair vs. Falcon Pasig City, Branch 71, presided over by respondent Judge Falcon. In that RTC petition, BCA prayed for the following: WHEREFORE, BCA respectfully prays that this Honorable Court, before the constitution of the arbitral tribunal in PDRCI Case No. 30-2006/BGF, grant petitioner interim relief in the following manner: (a) upon filing of this Petition, immediately issue an order temporarily restraining Respondents [DFA and BSP], their agents, representatives, awardees, suppliers and assigns (i) from awarding a new contract to implement the Project, or any similar electronic passport or visa project; or (ii) if such contract has been awarded, from implementing such Project or similar projects until further orders from this Honorable Court; (b) after notice and hearing, issue a writ of preliminary injunction ordering Respondents [DFA and BSP], their agents, representatives, awardees, suppliers and assigns to desist (i) from awarding a new contract to implement the Project or any similar electronic passport or visa project; or (ii) if such contract has been awarded, from implementing such Project or similar projects, and to maintain _______________

the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request.

(b)

The following rules on interim or provisional relief shall be observed:

(1) Any party may request that provisional relief be granted against the adverse party. (2) (i) (ii) Such relief may be granted: to prevent irreparable loss or injury; to provide security for the performance of any obligation;

(iii) to produce or preserve any evidence; or (iv) to compel any other appropriate act or omission. 663

VOL. 629, SEPTEMBER 1, 2010 663 Department of Foreign Affair vs. Falcon the status quo ante pending the resolution on the merits of BCAs Request for Arbitration; and (c) render judgment affirming the interim relief granted to BCA until the dispute between the parties shall have been resolved with finality. BCA also prays for such other relief, just and equitable under the premises.37 BCA alleged, in support for its application for a Temporary Restraining Order (TRO), that unless the DFA and the BSP were immediately restrained, they would proceed to undertake the project together with a third party to defeat the reliefs BCA sought in its Request for Arbitration, thus causing BCA to suffer grave and irreparable injury from the loss of substantial investments in connection with the implementation of the MRP/V Project. Thereafter, the DFA filed an Opposition (to the Application for Temporary Restraining Order and/or Writ of Preliminary Injunction) dated January 18, 2007,38 alleging that BCA has no cause of action against it as the contract between them is for machine readable passports and visas which is not the same as the contract it has with the BSP for the supply of electronic passports. The DFA also pointed out that the Filipino people and the governments international standing would suffer great damage if a TRO would be issued to stop the e-Passport Project. The DFA mainly anchored its opposition on Republic Act No. 8975, which prohibits trial courts from issuing a TRO, preliminary injunction or mandatory injunction against the bidding or awarding of a contract or project of the national government. On January 23, 2007, after summarily hearing the parties oral arguments on BCAs application for the issuance of a TRO, the trial court ordered the issuance of a TRO restrain-

_______________

37 Rollo, p. 284; page 9 of the Petition for Interim Relief. 38 Id., at pp. 287-289. 664

664 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon ing the DFA and the BSP, their agents, representatives, awardees, suppliers and assigns from awarding a new contract to implement the Project or any similar electronic passport or visa project, or if such contract has been awarded, from implementing such or similar projects.39 The trial court also set for hearing BCAs application for preliminary injunction. Consequently, the DFA filed a Motion for Reconsideration40 of the January 23, 2007 Order. The BSP, in turn, also sought to lift the TRO and to dismiss the petition. In its Urgent Omnibus Motion dated February 1, 2007,41 the BSP asserted that BCA is not entitled to an injunction, as it does not have a clear right which ought to be protected, and that the trial court has no jurisdiction to enjoin the implementation of the e-Passport Project which, the BSP alleged, is a national government project under Republic Act No. 8975. In the hearings set for BCAs application for preliminary injunction, BCA presented as witnesses, Mr. Bonifacio Sumbilla, its President, Mr. Celestino Mercader, Jr. from the Independent Verification and Validation Contractor commissioned by the DFA under the Amended BOT Agreement, and DFA Assistant Secretary Domingo Lucenario, Jr. as adverse party witness. The DFA and the BSP did not present any witness during the hearings for BCAs application for preliminary injunction. According to the DFA and the BSP, the trial court did not have any jurisdiction over the case considering that BCA did not pay the correct docket fees and that only the Supreme Court could issue a TRO on the bidding for a national government project like the e-

Passport Project pursuant to the provisions of Republic Act No. 8975. Under Section 3 of Republic Act No. 8975, the RTC could only issue a TRO against _______________

39 Id., at pp. 290-291. 40 Id., at pp. 313-338. 41 Id., at pp. 339-356. 665

VOL. 629, SEPTEMBER 1, 2010 665 Department of Foreign Affair vs. Falcon a national government project if it involves a matter of extreme urgency involving a constitutional issue, such that unless a TRO is issued, grave injustice and irreparable injury will arise. Thereafter, BCA filed an Omnibus Comment [on Opposition and Supplemental Opposition (To the Application for Temporary Restraining Order and/or Writ of Preliminary Injunction)] and Opposition [to Motion for Reconsideration (To the Temporary Restraining Order dated January 23, 2007)] and Urgent Omnibus Motion [(i) To Lift Temporary Restraining Order; and (ii) To Dismiss the Petition] dated January 31, 2007.42 The DFA and the BSP filed their separate Replies (to BCAs Omnibus Comment) dated February 9, 200743 and February 13, 2007,44 respectively. On February 14, 2007, the trial court issued an Order granting BCAs application for preliminary injunction, to wit: WHEREFORE, in view of the above, the court resolves that it has jurisdiction over the instant petition and to issue the provisional remedy prayed for, and therefore, hereby GRANTS petitioners [BCAs] application for preliminary injunction. Accordingly, upon posting a bond in the amount of Ten Million Pesos (P10,000,000.00), let a writ of preliminary injunction issue ordering respondents [DFA and BSP], their agents, representatives, awardees, suppliers

and assigns to desist (i) from awarding a new contract to implement the project or any similar electronic passport or visa project or (ii) if such contract has been awarded from implementing such project or similar projects. The motion to dismiss is denied for lack of merit. The motions for reconsideration and to lift temporary restraining Order are now moot and academic by reason of the expiration of the TRO.45 _______________

42 Id., at pp. 357-408. 43 Id., at pp. 409-424. 44 Id., at pp. 425-440. 45 Id., at p. 92. 666

666 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon On February 16, 2007, BCA filed an Amended Petition,46 wherein paragraphs 3.3(b) and 4.3 were modified to add language to the effect that unless petitioners were enjoined from awarding the e-Passport Project, BCA would be deprived of its constitutionally-protected right to perform its contractual obligations under the original and amended BOT Agreements without due process of law. Subsequently, on February 26, 2007, the DFA and the BSP received the Writ of Preliminary Injunction dated February 23, 2007. Hence, on March 2, 2007, the DFA and the BSP filed the instant Petition for Certiorari47 and prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction, imputing grave abuse of discretion on the trial court when it granted interim relief to BCA and issued the assailed Order dated February 14, 2007 and the writ of preliminary injunction dated February 23, 2007.

The DFA and the BSP later filed an Urgent Motion for Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction dated March 5, 2007.48 On March 12, 2007, the Court required BCA to file its comment on the said petition within ten days from notice and granted the Office of the Solicitor Generals urgent motion for issuance of a TRO and/or writ of preliminary injunction,49 thus: After deliberating on the petition for certiorari and prohibition with temporary restraining order and/or writ of preliminary injunction assailing the Order dated 14 February 2007 of the Regional Trial Court, Branch 71, Pasig City, in Civil Case No. 71079, the Court, without necessarily giving due course thereto, resolves to _______________

46 Id., at pp. 473-484. 47 Id., at pp. 3-485. 48 Id., at pp. 491-495. 49 Id., at pp. 497-502. 667

VOL. 629, SEPTEMBER 1, 2010 667 Department of Foreign Affair vs. Falcon require respondents to COMMENT thereon (not to file a motion to dismiss) within ten (10) days from notice. The Court further resolves to GRANT the Office of the Solicitor Generals urgent motion for issuance of a temporary restraining order and/or writ of preliminary injunction dated 05 March 2007 and ISSUE a TEMPORARY RESTRAINING ORDER, as prayed for, enjoining respondents from implementing the assailed Order dated 14 February 2007 and the Writ of Preliminary Injunction dated 23

February 2007, issued by respondent Judge Franco T. Falcon in Civil Case No. 71079 entitled BCA International Corporation vs. Department of Foreign Affairs and Bangko Sentral ng Pilipinas, and from conducting further proceedings in said case until further orders from this Court. BCA filed on April 2, 2007 its Comment with Urgent Motion to Lift TRO,50 to which the DFA and the BSP filed their Reply dated August 14, 2007.51 In a Resolution dated June 4, 2007,52 the Court denied BCAs motion to lift TRO. BCA filed another Urgent Omnibus Motion dated August 17, 2007, for the reconsideration of the Resolution dated June 4, 2007, praying that the TRO issued on March 12, 2007 be lifted and that the petition be denied. In a Resolution dated September 10, 2007,53 the Court denied BCAs Urgent Omnibus Motion and gave due course to the instant petition. The parties were directed to file their respective memoranda within 30 days from notice of the Courts September 10, 2007 Resolution. Petitioners DFA and BSP submit the following issues for our consideration: _______________

50 Id., at pp. 511-1169. 51 Id., at pp. 1931-1965. 52 Id., at p. 1837. 53 Id., at pp. 1978-1980. 668

668 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Issues I

WHETHER OR NOT THE RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN HE ISSUED THE ASSAILED ORDER, WHICH EFFECTIVELY ENJOINED THE IMPLEMENTATION OF THE E-PASSPORT PROJECTA NATIONAL GOVERNMENT PROJECT UNDER REPUBLIC ACT NO. 8975. II WHETHER OR NOT THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN GRANTING RESPONDENT BCAS INTERIM RELIEF INASMUCH AS: (I) RESPONDENT BCA HAS NOT ESTABLISHED A CLEAR RIGHT THAT CAN BE PROTECTED BY AN INJUNCTION; AND (II) RESPONDENT BCA HAS NOT SHOWN THAT IT WILL SUSTAIN GRAVE AND IRREPARABLE INJURY THAT MUST BE PROTECTED BY AN INJUNCTION. ON THE CONTRARY, IT IS THE FILIPINO PEOPLE, WHO PETITIONERS PROTECT, THAT WILL SUSTAIN SERIOUS AND SEVERE INJURY BY THE INJUNCTION.54 At the outset, we dispose of the procedural objections of BCA to the petition, to wit: (a) petitioners did not follow the hierarchy of courts by filing their petition directly with this Court, without filing a motion for reconsideration with the RTC and without filing a petition first with the Court of Appeals; (b) the person who verified the petition for the DFA did not have personal knowledge of the facts of the case and whose appointment to his position was highly irregular; and (c) the verification by the Assistant Governor and General _______________

54 Id., at pp. 2185-2186. 669

VOL. 629, SEPTEMBER 1, 2010 669 Department of Foreign Affair vs. Falcon

Counsel of the BSP of only selected paragraphs of the petition was with the purported intent to mislead this Court. Although the direct filing of petitions for certiorari with the Supreme Court is discouraged when litigants may still resort to remedies with the lower courts, we have in the past overlooked the failure of a party to strictly adhere to the hierarchy of courts on highly meritorious grounds. Most recently, we relaxed the rule on court hierarchy in the case of Roque, Jr. v. Commission on Elections,55 wherein we held: The policy on the hierarchy of courts, which petitioners indeed failed to observe, is not an iron-clad rule. For indeed the Court has full discretionary power to take cognizance and assume jurisdiction of special civil actions for certiorari and mandamus filed directly with it for exceptionally compelling reasons or if warranted by the nature of the issues clearly and specifically raised in the petition.56 (Emphases ours.) The Court deems it proper to adopt a similarly liberal attitude in the present case in consideration of the transcendental importance of an issue raised herein. This is the first time that the Court is confronted with the question of whether an information and communication technology project, which does not conform to our traditional notion of the term infrastructure, is covered by the prohibition on the issuance of court injunctions found in Republic Act No. 8975, which is entitled An Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions or Preliminary Mandatory Injunctions, Providing Penalties for Violations Thereof, and for Other Purposes. Taking into account the current _______________

55 G.R. No. 188456, September 10, 2009, 599 SCRA 69. 56 Id., at pp. 112-113, citing Chavez v. National Housing Authority, G.R. No. 164527, August 15, 2007, 530 SCRA 235, 285; Cabarles v. Maceda, G.R. No. 161330, February 20, 2007, 516 SCRA 303, 320. 670

670 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon trend of computerization and modernization of administrative and service systems of government offices, departments and agencies, the resolution of this issue for the guidance of the bench and bar, as well as the general public, is both timely and imperative. Anent BCAs claim that Mr. Edsel T. Custodio (who verified the Petition on behalf of the DFA) did not have personal knowledge of the facts of the case and was appointed to his position as Acting Secretary under purportedly irregular circumstances, we find that BCA failed to sufficiently prove such allegations. In any event, we have previously held that [d]epending on the nature of the allegations in the petition, the verification may be based either purely on personal knowledge, or entirely on authentic records, or on both sources.57 The alleged lack of personal knowledge of Mr. Custodio (which, as we already stated, BCA failed to prove) would not necessarily render the verification defective for he could have verified the petition purely on the basis of authentic records. As for the assertion that the partial verification of Assistant Governor and General Counsel Juan de Zuniga, Jr. was for the purpose of misleading this Court, BCA likewise failed to adduce evidence on this point. Good faith is always presumed. Paragraph 3 of Mr. Zunigas verification indicates that his partial verification is due to the fact that he is verifying only the allegations in the petition peculiar to the BSP. We see no reason to doubt that this is the true reason for his partial or selective verification. In sum, BCA failed to successfully rebut the presumption that the official acts (of Mr. Custodio and Mr. Zuniga) were done in good faith and in the regular performance of official _______________

57 Aparece v. J. Marketing Corporation, G.R. No. 174224, October 17, 2008, 569 SCRA 636, 643. 671

VOL. 629, SEPTEMBER 1, 2010 671 Department of Foreign Affair vs. Falcon duty.58 Even assuming the verifications of the petition suffered from some defect, we have time and again ruled that [t]he ends of justice are better served when cases are determined on the meritsafter all parties are given full opportunity to ventilate their causes and defensesrather than on technicality or some procedural imperfections.59 In other words, the Court may suspend or even disregard rules when the demands of justice so require.60 We now come to the substantive issues involved in this case. On whether the trial court had jurisdiction to issue a writ of preliminary injunction in the present case In their petition, the DFA and the BSP argue that respondent Judge Falcon gravely abused his discretion amounting to lack or excess of jurisdiction when he issued the assailed orders, which effectively enjoined the bidding and/or implementation of the e-Passport Project. According to petitioners, this violated the clear prohibition under Republic Act No. 8975 regarding the issuance of TROs and preliminary injunctions against national government projects, such as the e-Passport Project. The prohibition invoked by petitioners is found in Section 3 of Republic Act No. 8975, which reads: Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions.No court, except the Supreme Court, shall issue _______________

58 See Rules of Court, Rule 131, Section 3(m); Philippine Agila Satellite, Inc. v. Trinidad-Lichauco, G.R. No. 142362, May 3, 2006, 489 SCRA 22, 31.

59 Ateneo de Naga University v. Manalo, 497 Phil. 635, 646-647; 458 SCRA 325, 338 (2005). 60 See, for example, Chuidian v. Sandiganbayan, G.R. Nos. 156383 & 160723, July 31, 2006, 497 SCRA 327, 339. 672

672 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the governments direction, to restrain, prohibit or compel the following acts: (a) Acquisition, clearance and development of the right-of-way and/or site or location of any national government project; (b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof; (c) Commencement, prosecution, execution, implementation, operation of any such contract or project; (d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project. This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice to any liability that the guilty party may incur under existing laws. From the foregoing, it is indubitable that no court, aside from the Supreme Court, may enjoin a national government project unless the matter is one of extreme urgency involving a constitutional issue such that unless the act complained of is enjoined, grave injustice or irreparable injury would arise. 673

VOL. 629, SEPTEMBER 1, 2010 673 Department of Foreign Affair vs. Falcon What then are the national government projects over which the lower courts are without jurisdiction to issue the injunctive relief as mandated by Republic Act No. 8975? Section 2(a) of Republic Act No. 8975 provides: Section 2. Definition of Terms.

(a) National government projects shall refer to all current and future national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and -controlled corporations, all projects covered by Republic Act No. 6975, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding. As petitioners themselves pointed out, there are three types of national government projects enumerated in Section 2(a), to wit:

(a) current and future national government infrastructure projects, engineering works and service contracts, including projects undertaken by government-owned and controlled corporations; (b) all projects covered by R.A. No. 6975, as amended by R.A. No. 7718, or the Build-Operate-and-Transfer (BOT) Law; and (c) other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement repair and rehabilitation, regardless of the source of funding. Under Section 2(a) of the BOT Law as amended by Republic Act No. 7718,61 private sector infrastructure or devel_______________

61 An Act Amending Certain Sections of Republic Act No. 6957, Entitled An Act Authorizing the Financing, Construction, Operation 674

674 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon opment projects are those normally financed and operated by the public sector but which will now be wholly or partly implemented by the private sector, including but not limited to, power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation, telecommunications, railroads and railways, transport systems, land reclamation projects, industrial estates or townships, housing, government buildings, tourism projects, markets, slaughterhouses, warehouses, solid waste management, information technology networks and database infrastructure, education and health facilities, sewerage, drainage, dredging, and other infrastructure and development projects as may be authorized by the appropriate agency.

In contrast, Republic Act No. 9184,62 also known as the Government Procurement Reform Act, defines infrastructure projects in Section 5(k) thereof in this manner: (k) Infrastructure Projectsinclude the construction, improvement, rehabilitation, demolition, repair, restoration or maintenance of roads and bridges, railways, airports, seaports, communication facilities, civil works components of information technology projects, irrigation, flood control and drainage, water supply, sanitation, sewerage and solid waste management systems, shore protection, energy/power and electrification facilities, national buildings, school buildings, hospital buildings and other related construction projects of the government. (Emphasis supplied.) In the present petition, the DFA and the BSP contend that the bidding for the supply, delivery, installation and commissioning of a system for the production of Electronic Passport _______________

and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes or the Philippine Build-Operate-Transfer (BOT) Law, Approved on May 5, 1994.

62 An Act Providing for the Modernization, Standardization and Regulation of the Procurement Activities of the Government and for Other Purposes, Approved on January 18, 2003. 675

VOL. 629, SEPTEMBER 1, 2010 675 Department of Foreign Affair vs. Falcon Booklets, is a national government project within the definition of Section 2 of Republic Act No. 8975. Petitioners also point to the Senate deliberations on Senate Bill No. 203863 (later Republic Act No. 8975) which allegedly show the legislatives intent to expand the scope and definition of national government

projects to cover not only the infrastructure projects enumerated in Presidential Decree No. 1818, but also future projects that may likewise be considered national government infrastructure projects, like the e-Passport Project, to wit: Senator Cayetano. x x x Mr. President, the present bill, the Senate Bill No. 2038, is actually an improvement of P.D. No. 1818 and definitely not a repudiation of what I have earlier said, as my good friend clearly stated. But this is really an effort to improve both the scope and definition of the term government projects and to ensure that lower court judges obey and observe this prohibition on the issuance of TROs on infrastructure projects of the government. xxxx Senator Cayetano. That is why, Mr. President, I did try to explain why I would accept the proposed amendment, meaning the totality of the repeal of P.D. 1818 which is not found in the original version of the bill, because of my earlier explanation that the definition of the term government infrastructure project covers all of those enumerated in Section 1 of P.D. No. 1818. And the reason for that, as we know, is we do not know what else could be considered government infrastructure project in the next 10 or 20 years. x x x So, using the Latin maxim of expression unius est exclusion alterius, which means what is expressly mentioned is tantamount to an express exclusion of the others, that is the reason we did not include particularly an enumeration of certain activities of the government found in Section 1 of P.D. No. 1818. Because to do that, it may be a good excuse for a brilliant lawyer to say Well, you know, since it does not cover this particular activity, ergo, the Regional Trial Court may issue TRO. _______________

63 Transcript of Senate Deliberations on Senate Bill 2038 (August 2 and 9, 2000), DFA and BSP Petition; Rollo, pp. 53-54. 676

676

SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Using the foregoing discussions to establish that the intent of the framers of the law was to broaden the scope and definition of national government projects and national infrastructure projects, the DFA and the BSP submit that the said scope and definition had since evolved to include the e-Passport Project. They assert that the concept of infrastructure must now refer to any and all elements that provide support, framework, or structure for a given system or organization, including information technology, such as the ePassport Project. Interestingly, petitioners represented to the trial court that the e-Passport Project is a BOT project but in their petition with this Court, petitioners simply claim that the e-Passport Project is a national government project under Section 2 of Republic Act No. 8975. This circumstance is significant, since relying on the claim that the e-Passport Project is a BOT project, the trial court ruled in this wise: The prohibition against issuance of TRO and/or writ of preliminary injunction under RA 8975 applies only to national government infrastructure project covered by the BOT Law, (RA 8975, Sec 3[b] in relation to Sec. 2). The national government projects covered under the BOT are enumerated under Sec. 2 of RA 6957, as amended, otherwise known as the BOT Law. Notably, it includes information technology networks and database infrastructure. In relation to information technology projects, infrastructure projects refer to the civil works components thereof. (R.A. No. 9184 [2003], Sec. 5[c]{sic}).64 Respondent BSPs request for bid, for the supply, delivery, installation and commissioning of a system for the production of Electronic Passport Booklets appears to be beyond the scope of the term civil works. Respondents did not present evidence to prove otherwise.65 (Emphases ours.) _______________

64 The definition of infrastructure under Republic Act No. 9184 is found in Section 5(k), not Section 5(c).

65 Rollo, pp. 88-89. 677

VOL. 629, SEPTEMBER 1, 2010 677 Department of Foreign Affair vs. Falcon From the foregoing, it can be gleaned that the trial court accepted BCAs reasoning that, assuming the e-Passport Project is a project under the BOT Law, Section 2 of the BOT Law must be read in conjunction with Section 5(c) of Republic Act No. 9184 or the Government Procurement Reform Act to the effect that only the civil works component of information technology projects are to be considered infrastructure. Thus, only said civil works component of an information technology project cannot be the subject of a TRO or writ of injunction issued by a lower court. Although the Court finds that the trial court had jurisdiction to issue the writ of preliminary injunction, we cannot uphold the theory of BCA and the trial court that the definition of the term infrastructure project in Republic Act No. 9184 should be applied to the BOT Law. Section 5 of Republic Act No. 9184 prefaces the definition of the terms therein, including the term infrastructure project, with the following phrase: For purposes of this Act, the following terms or words and phrases shall mean or be understood as follows x x x. This Court has stated that the definition of a term in a statute is not conclusive as to the meaning of the same term as used elsewhere.66 This is evident when the legislative definition is expressly made for the purposes of the statute containing such definition.67 There is no legal or rational basis to apply the definition of the term infrastructure project in one statute to another statute enacted years before and which already defined the types of projects it covers. Rather, a reading of the two stat_______________

66 Endencia v. David, 93 Phil. 696, 701 (1953); Misamis Lumber Co., Inc. v. Collector of Internal Revenue, 102 Phil. 116, 122 (1957); Calderon v. Carale, G.R. No. 91636, April 23, 1992, 208 SCRA 254, 263. 67 City of Manila v. Manila Remnant Co., Inc., 100 Phil. 796, 800 (1957). 678

678 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon utes involved will readily show that there is a legislative intent to treat information technology projects differently under the BOT Law and the Government Procurement Reform Act. In the BOT Law as amended by Republic Act No. 7718, the national infrastructure and development projects covered by said law are enumerated in Section 2(a) as follows: SEC. 2. Definition of Terms.The following terms used in this Act shall have the meanings stated below: (a) Private sector infrastructure or development projectsThe general description of infrastructure or development projects normally financed and operated by the public sector but which will now be wholly or partly implemented by the private sector, including but not limited to, power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation, telecommunications, railroads and railways, transport systems, land reclamation projects, industrial estates of townships, housing, government buildings, tourism projects, markets, slaughterhouses, warehouses, solid waste management, information technology networks and database infrastructure, education and health facilities, sewerage, drainage, dredging, and other infrastructure and development projects as may be authorized by the appropriate agency pursuant to this Act. Such projects shall be undertaken through contractual arrangements as defined hereunder and such other variations as may be approved by the President of the Philippines. For the construction stage of these infrastructure projects, the project proponent may obtain financing from foreign and/or domestic sources and/or

engage the services of a foreign and/or Filipino contractor: Provided, That, in case an infrastructure or a development facilitys operation requires a public utility franchise, the facility operator must be a Filipino or if a corporation, it must be duly registered with the Securities and Exchange Commission and owned up to at least sixty percent (60%) by Filipinos: Provided, further, That in the case of foreign contractors, Filipino labor shall be employed or hired in the different phases of construction where Filipino skills are 679

VOL. 629, SEPTEMBER 1, 2010 679 Department of Foreign Affair vs. Falcon available: Provided, finally, That projects which would have difficulty in sourcing funds may be financed partly from direct government appropriations and/or from Official Development Assistance (ODA) of foreign governments or institutions not exceeding fifty percent (50%) of the project cost, and the balance to be provided by the project proponent. (Emphasis supplied.) A similar provision appears in the Revised IRR of the BOT Law as amended, to wit: SECTION 1.3DEFINITION OF TERMS For purposes of these Implementing Rules and Regulations, the terms and phrases hereunder shall be understood as follows: xxxx v. Private Sector Infrastructure or Development ProjectsThe general description of infrastructure or Development Projects normally financed, and operated by the public sector but which will now be wholly or partly financed, constructed and operated by the private sector, including but not limited to, power plants, highways, ports, airports, canals, dams, hydropower projects, water supply, irrigation, telecommunications, railroad and railways, transport systems, land reclamation projects, industrial estates or townships, housing, government buildings, tourism projects, public markets, slaughterhouses, warehouses, solid waste management, information technology networks and database infrastructure, education and health facilities, sewerage, drainage,

dredging, and other infrastructure and development projects as may otherwise be authorized by the appropriate Agency/LGU pursuant to the Act or these Revised IRR. Such projects shall be undertaken through Contractual Arrangements as defined herein, including such other variations as may be approved by the President of the Philippines. xxxx SECTION 2.2ELIGIBLE TYPES OF PROJECTS The Construction, rehabilitation, improvement, betterment, modernization, operation, financing and maintenance of the 680 expansion,

680 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon following types of projects which are normally financed and operated by the public sector which will now be wholly or partly financed, constructed and operated by the private sector, including other infrastructure and development projects as may be authorized by the appropriate agencies, may be proposed under the provisions of the Act and these Revised IRR, provided however that such projects have a cost recovery component which covers at least 50% of the Project Cost, or as determined by the Approving Body: xxxx h. Information technology (IT) and data base infrastructure, including modernization of IT, geo-spatial resource mapping and cadastral survey for resource accounting and planning. (Underscoring supplied.) Undeniably, under the BOT Law, wherein the projects are to be privately funded, the entire information technology project, including the civil works component and the technological aspect thereof, is considered an infrastructure or development project and treated similarly as traditional infrastructure projects. All the rules applicable to traditional infrastructure projects are also applicable to information technology projects. In fact, the MRP/V Project awarded to BCA under the BOT Law appears to include both

civil works (i.e., site preparation of the Central Facility, regional DFA offices and foreign service posts) and non-civil works aspects (i.e., development, installation and maintenance in the Philippines and foreign service posts of a computerized passport and visa issuance system, including creation of databases, storage and retrieval systems, training of personnel and provision of consumables). In contrast, under Republic Act No. 9184 or the Government Procurement Reform Act, which contemplates projects to be funded by public funds, the term infrastructure project was limited to only the civil works component of information technology projects. The non-civil works component of information technology projects would be treated as an acquisition of goods or consulting services as the case may be. 681

VOL. 629, SEPTEMBER 1, 2010 681 Department of Foreign Affair vs. Falcon This limited definition of infrastructure project in relation to information technology projects under Republic Act No. 9184 is significant since the IRR of Republic Act No. 9184 has some provisions that are particular to infrastructure projects and other provisions that are applicable only to procurement of goods or consulting services.68 Implicitly, the civil works component of information technology projects are subject to the provisions on infrastructure projects while the technological and other components would be covered by the provisions on procurement of goods or consulting services as the circumstances may warrant. When Congress adopted a limited definition of what is to be considered infrastructure in relation to information technology projects under the Government Procurement Reform Act, legislators are presumed to have taken into account previous _______________

68 Some examples of provisions in the IRR of Republic Act No. 9184 which differentiate among infrastructure projects, goods procurement and consulting services procurement follow: In Section 13.1, the IRR specifies who may be observers during the bidding process for the different types of procurement activities. Section 21 sets out different guidelines for the contents of the invitation to bid and the periods for advertising and posting the invitation to bid for each type of procurement activity. Section 23 enumerates the proponents eligibility requirements for the procurement of goods and infrastructure projects while the eligibility requirements for consulting services are specified in Section 24. Section 25 lays down different documentation requirements for bids for each type of procurement activity. Section 32 sets out the guidelines for bids evaluation for the procurement of goods and infrastructure projects while Section 33 contains the guidelines for bids evaluation for consulting services. Section 42 states that the contract implementation guidelines for the procurement of goods, infrastructure projects and consulting services are set out in separate annexes (Annexes D, E and F of the IRR). 682

682 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon laws concerning infrastructure projects (the BOT Law and Republic Act No. 8975) and deliberately adopted the limited definition. We can further presume that Congress had written into law a different treatment for information technology projects financed by public funds vis--vis privately funded projects for a valid legislative purpose. The idea that the definitions of terms found in the Government Procurement Reform Act were not meant to be applied to projects under the BOT Law is

further reinforced by the following provision in the IRR of the Government Procurement Reform Act: Section 1. Purpose and General Coverage This Implementing Rules and Regulations (IRR) Part A, hereinafter called IRRA, is promulgated pursuant to Section 75 of Republic Act No. 9184 (R.A. 9184), otherwise known as the Government Procurement Reform Act (GPRA), for the purpose of prescribing the necessary rules and regulations for the modernization, standardization, and regulation of the procurement activities of the government. This IRR-A shall cover all fully domestically-funded procurement activities from procurement planning up to contract implementation and termination, except for the following: a) Acquisition of real property which shall be governed by Republic Act No. 8974 (R.A. 8974), entitled An Act to Facilitate the Acquisition of Right-of-Way Site or Location for National Government Infrastructure Projects and for Other Purposes, and other applicable laws; and b) Private sector infrastructure or development projects and other procurement covered by Republic Act No. 7718 (R.A. 7718), entitled An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes, as amended: Provided, however, That for the portions financed by the Government, the provisions of this IRR-A shall apply. The IRR-B for foreign-funded procurement activities shall be the subject of a subsequent issuance. (Emphases supplied.) 683

VOL. 629, SEPTEMBER 1, 2010 683 Department of Foreign Affair vs. Falcon The foregoing provision in the IRR can be taken as an administrative interpretation that the provisions of Republic Act No. 9184 are inapplicable to a BOT project except only insofar as such portions of the BOT project that are financed by the government.

Taking into account the different treatment of information technology projects under the BOT Law and the Government Procurement Reform Act, petitioners contention the trial court had no jurisdiction to issue a writ of preliminary injunction in the instant case would have been correct if the e-Passport Project was a project under the BOT Law as they represented to the trial court. However, petitioners presented no proof that the e-Passport Project was a BOT project. On the contrary, evidence adduced by both sides tended to show that the e-Passport Project was a procurement contract under Republic Act No. 9184. The BSPs on-line request for expression of interest and to bid for the ePassport Project69 from the BSP website and the newspaper clipping70 of the same request expressly stated that [t]he two stage bidding procedure under Section 30.4 of the Implementing Rules and Regulation (sic) Part-A of Republic Act No. 9184 relative to the bidding and award of the contract shall apply. During the testimony of DFA Assistant Secretary Domingo Lucenario, Jr. before the trial court, he admitted that the e-Passport Project is a BSP procurement project and that it is the BSP that will pay the suppliers.71 In petitioners Manifestation dated July 29, 200872 and the Erratum73 thereto, petitioners informed the Court that a con_______________

69 Rollo pp. 273-275 and 787-789; Annex AA of the Petition and Annex 30 of BCAs Comment. 70 Id., at p. 790; Annex 31 of BCAs Comment. 71 Id., at p. 1713; TSN of the hearing held on February 7, 2007. 72 Id., at pp. 2347-2353. 73 Id., at pp. 2354-2358. 684

684 SUPREME COURT REPORTS ANNOTATED

Department of Foreign Affair vs. Falcon tract for the supply of a complete package of systems design, technology, hardware, software, and peripherals, maintenance and technical support, ecovers and datapage security laminates for the centralized production and personalization of Machine Readable Electronic Passport was awarded to Francois Charles Oberthur Fiduciaire. In the Notice of Award dated July 2, 200874 attached to petitioners pleading, it was stated that the failure of the contractor/supplier to submit the required performance bond would be sufficient ground for the imposition of administrative penalty under Section 69 of the IRR-A of Republic Act No. 9184. Being a government procurement contract under Republic Act No. 9184, only the civil works component of the e-Passport Project would be considered an infrastructure project that may not be the subject of a lower court-issued writ of injunction under Republic Act No. 8975. Could the e-Passport Project be considered as engineering works or a service contract or as related and necessary activities under Republic Act No. 8975 which may not be enjoined? We hold in the negative. Under Republic Act No. 8975, a service contract refers to infrastructure contracts entered into by any department, office or agency of the national government with private entities and nongovernment organizations for services related or incidental to the functions and operations of the department, office or agency concerned. On the other hand, the phrase other related and necessary activities obviously refers to activities related to a government infrastructure, engineering works, service contract or project under the BOT Law. In other words, to be considered a service contract or related activity, petitioners must show that the e-Passport Project is an infrastructure project or necessarily related to an infrastructure project. This, petitioners failed to do for they saw fit not to present any evidence on the de_______________

74 Id., at p. 2357. 685

VOL. 629, SEPTEMBER 1, 2010 685 Department of Foreign Affair vs. Falcon tails of the e-Passport Project before the trial court and this Court. There is nothing on record to indicate that the e-Passport Project has a civil works component or is necessarily related to an infrastructure project. Indeed, the reference to Section 30.475 of the IRR of Republic Act No. 9184 (a provision specific to the procurement of goods) in the BSPs request for interest and to bid confirms that the e-Passport Project is a procurement of goods and not an infrastructure project. Thus, within the context of Republic Act No. 9184which is the governing law for the e-Passport Projectthe said Project is not an infrastructure project that _______________

75 Section 30.4 of the IRR of Republic Act No. 9184 states: 30.4. For the procurement of goods where, due to the nature of the requirements of the project, the required technical specifications/requirements of the contract cannot be precisely defined in advance of bidding, or where the problem of technically unequal bids is likely to occur, a two (2)-stage bidding procedure may be employed. In these cases, the procuring entity concerned shall prepare the bidding documents, including the technical specification in the form of performance criteria only. Under this procedure, prospective bidders shall be requested at the first stage to submit their respective Letter of Intent, eligibility requirements if needed, and initial technical proposals only (no price tenders). The concerned BAC shall then evaluate the technical merits of the proposals received from eligible bidders vis--vis the required performance standards. A meeting/discussion shall then be held by the BAC with those eligible bidders whose technical tenders meet the minimum required standards stipulated in the bidding documents for purposes of drawing up the final revised technical specifications/requirements of the contract. Once the final revised technical specifications are completed and duly approved by the concerned BAC, copies of the same shall be issued to all the bidders identified in the first stage who shall then be required to submit their revised technical tenders, including their price proposals in two (2) separate sealed envelopes in accordance with this IRR-A, at a specified deadline, after which time no more

bids shall be received. The concerned BAC shall then proceed in accordance with the procedure prescribed in this IRR-A. (Emphasis supplied.) 686

686 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon is protected from lower court issued injunctions under Republic Act No. 8975, which, to reiterate, has for its purpose the expeditious and efficient implementation and completion of government infrastructure projects. We note that under Section 28, Republic Act No. 9285 or the Alternative Dispute Resolution Act of 2004,76 the grant of an interim measure of protection by the proper court before the constitution of an arbitral tribunal is allowed: Sec. 28. Grant of Interim Measure of Protection.(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection, or modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request. (a) The following rules on interim or provisional relief shall be observed:

(1) Any party may request that provisional relief be granted against the adverse party. (2) (i) (ii) Such relief may be granted: to prevent irreparable loss or injury; to provide security for the performance of any obligation;

(iii) to produce or preserve any evidence; or _______________

76 An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes; approved on April 2, 2004. 687

VOL. 629, SEPTEMBER 1, 2010 687 Department of Foreign Affair vs. Falcon (iv) to compel any other appropriate act or omission. (3) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order. (4) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and the evidence supporting the request. (5) The order shall be binding upon the parties.

(6) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an arbitral tribunal. (7) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all expenses and reasonable attorneys fees, paid in obtaining the orders judicial enforcement. Section 3(h) of the same statute provides that the Court as referred to in Article 6 of the Model Law shall mean a Regional Trial Court. Republic Act No. 9285 is a general law applicable to all matters and controversies to be resolved through alternative dispute resolution methods. This law allows a Regional Trial Court to grant interim or provisional relief,

including preliminary injunction, to parties in an arbitration case prior to the constitution of the arbitral tribunal. This general statute, however, must give way to a special law governing national government projects, Republic Act No. 8975 which prohibits courts, except the Supreme Court, from issuing TROs and writs of preliminary injunction in cases involving national government projects. However, as discussed above, the prohibition in Republic Act No. 8975 is inoperative in this case, since petitioners 688

688 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon failed to prove that the e-Passport Project is national government project as defined therein. Thus, the trial court had jurisdiction to issue a writ of preliminary injunction against the e-Passport Project. On whether the trial courts issuance of a writ of injunction was proper Given the above ruling that the trial court had jurisdiction to issue a writ of injunction and going to the second issue raised by petitioners, we answer the question: Was the trial courts issuance of a writ of injunction warranted under the circumstances of this case? Petitioners attack on the propriety of the trial courts issuance of a writ of injunction is two-pronged: (a) BCA purportedly has no clear right to the injunctive relief sought; and (b) BCA will suffer no grave and irreparable injury even if the injunctive relief were not granted. To support their claim that BCA has no clear right to injunctive relief, petitioners mainly allege that the MRP/V Project and the e-Passport Project are not the same project. Moreover, the MRP/V Project purportedly involves a technology (the 2D optical bar code) that has been rendered obsolete by the latest ICAO developments while the e-Passport Project will comply with the latest ICAO standards (the contactless integrated circuit). Parenthetically, and

not as a main argument, petitioners imply that BCA has no clear contractual right under the Amended BOT Agreement since BCA had previously assigned all its rights and obligations under the said Agreement to PPC. BCA, on the other hand, claims that the Amended BOT Agreement also contemplated the supply and/or delivery of e-Passports with the integrated circuit technology in the future and not only the machine readable passport with the 2D optical bar code technology. Also, it is BCAs assertion that the integrated circuit technology is only optional under the ICAO 689

VOL. 629, SEPTEMBER 1, 2010 689 Department of Foreign Affair vs. Falcon issuances. On the matter of its assignment of its rights to PPC, BCA counters that it had already terminated (purportedly at DFAs request) the assignment agreement in favor of PPC and that even assuming the termination was not valid, the Amended BOT Agreement expressly stated that BCA shall remain solidarily liable with its assignee, PPC. Most of these factual allegations and counter-allegations already touch upon the merits of the main controversy between the DFA and BCA, i.e., the validity and propriety of the termination of the Amended BOT Agreement (the MRP/V Project) between the DFA and BCA. The Court deems it best to refrain from ruling on these matters since they should be litigated in the appropriate arbitration or court proceedings between or among the concerned parties. One preliminary point, however, that must be settled here is whether BCA retains a right to seek relief against the DFA under the Amended BOT Agreement in view of BCAs previous assignment of its rights to PPC. Without preempting any factual finding that the appropriate court or arbitral tribunal on the matter of the validity of the assignment agreement with PPC or its termination, we agree with BCA that it remained a party to the Amended BOT Agreement, notwithstanding the execution of the assignment agreement in favor of PPC, for it was stipulated in the Amended BOT Agreement that BCA would be solidarily liable with its assignee. For convenient reference, we reproduce the relevant provision of the Amended BOT Agreement here:

Section 20.15. It is clearly and expressly understood that BCA may assign, cede and transfer all of its rights and obligations under this Amended BOT Agreement to PPC [Philippine Passport Corporation], as fully as if PPC is the original signatory to this Amended BOT Agreement, provided however that BCA shall nonetheless be jointly and severally liable with PPC for the performance of all the obligations and liabilities under this Amended BOT Agreement. (Emphasis supplied.) 690

690 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon Furthermore, a review of the records shows that the DFA continued to address its correspondence regarding the MRP/V Project to both BCA and PPC, even after the execution of the assignment agreement. Indeed, the DFAs Notice of Termination dated December 9, 2005 was addressed to Mr. Bonifacio Sumbilla as President of both BCA and PPC and referred to the Amended BOT Agreement executed between the Department of Foreign Affairs (DFA), on one hand, and the BCA International Corporation and/or the Philippine Passport Corporation (BCA/PPC). At the very least, the DFA is estopped from questioning the personality of BCA to bring suit in relation to the Amended BOT Agreement since the DFA continued to deal with both BCA and PPC even after the signing of the assignment agreement. In any event, if the DFA truly believes that PPC is an indispensable party to the action, the DFA may take necessary steps to implead PPC but this should not prejudice the right of BCA to file suit or to seek relief for causes of action it may have against the DFA or the BSP, for undertaking the e-Passport Project on behalf of the DFA. With respect to petitioners contention that BCA will suffer no grave and irreparable injury so as to justify the grant of injunctive relief, the Court finds that this particular argument merits consideration. The BOT Law as amended by Republic Act No. 7718, provides: SEC. 7. Contract Termination.In the event that a project is revoked, cancelled or terminated by the Government through no fault of the project proponent or by mutual agreement, the Government shall compensate the said

project proponent for its actual expenses incurred in the project plus a reasonable rate of return thereon not exceeding that stated in the contract as of the date of such revocation, cancellation or termination: Provided, That the interest of the Government in this instances shall be duly insured with the Government Service Insurance System [GSIS] or any other insurance entity duly accredited by the Office of the Insurance Commissioner: Provided, finally, That the 691

VOL. 629, SEPTEMBER 1, 2010 691 Department of Foreign Affair vs. Falcon cost of the insurance coverage shall be included in the terms and conditions of the bidding referred to above. In the event that the government defaults on certain major obligations in the contract and such failure is not remediable or if remediable shall remain unremedied for an unreasonable length of time, the project proponent/contractor may, by prior notice to the concerned national government agency or local government unit specifying the turn-over date, terminate the contract. The project proponent/contractor shall be reasonably compensated by the Government for equivalent or proportionate contract cost as defined in the contract. (Emphases supplied.) In addition, the Amended BOT Agreement, which is the law between and among the parties to it, pertinently provides: Section 17.01 DefaultIn case a party commits an act constituting an event of default, the non-defaulting party may terminate this Amended BOT Agreement by serving a written notice to the defaulting party specifying the grounds for termination and giving the defaulting party a period of ninety (90) days within which to rectify the default. If the default is not remedied within this period to the satisfaction of the non-defaulting party, then the latter will serve upon the former a written notice of termination indicating the effective date of termination.

Section 17.02 Proponents DefaultIf this Amended BOT Agreement is terminated by reason of the BCAs default, the DFA shall have the following options: A. Allow the BCAs unpaid creditors who hold a lien on the MRP/V Facility to foreclose on the MRP/V Facility. The right of the BCAs unpaid creditors to foreclose on the MRP/V Facility shall be valid for the duration of the effectivity of this Amended BOT Agreement; or, B. Allow the BCAs unpaid creditors who hold a lien on the MRP/V Facility to designate a substitute BCA for the MRP/V Project, provided the designated substitute BCA is qualified under existing laws and acceptable to the DFA. This substitute BCA shall hereinafter be referred to as the Substitute BCA. The Substi692

692 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon tute BCA shall assume all the BCAs rights and privileges, as well as the obligations, duties and responsibilities hereunder; provided, however, that the DFA shall at all times and its sole option, have the right to invoke and exercise any other remedy which may be available to the DFA under any applicable laws, rules and/or regulations which may be in effect at any time and from time to time. The DFA shall cooperate with the creditors with a view to facilitating the choice of a Substitute BCA, who shall take-over the operation, maintenance and management of the MRP/V Project, within three (3) months from the BCAs receipt of the notice of termination from the DFA. The Substituted BCA shall have all the rights and obligations of the previous BCA as contained in this Amended BOT Agreement; or C. Take-over the MRP/V Facility and assume all attendant liabilities thereof.

D. In all cases of termination due to the default of the BCA, it shall pay DFA liquidated damages equivalent to the applicable the (sic) Performance Security. Section 17.03 DFAs DefaultIf this Amended BOT Agreement is terminated by the BCA by reason of the DFAs Default, the DFA shall:

A. Be obligated to take over the MRP/V Facility on an as is, where is basis, and shall forthwith assume attendant liabilities thereof; and B. Pay liquidated damages to the BCA equivalent to the following amounts, which may be charged to the insurance proceeds referred to in Article 12: (1) In the event of termination prior to completion of the implementation of the MRP/V Project, damages shall be paid equivalent to the value of completed implementation, minus the aggregate amount of the attendant liabilities assumed by the DFA, plus ten percent (10%) thereof. The amount of such compensation shall be determined as of the date of the notice of termination and shall become due and demandable ninety (90) days after the date of this notice of termina693

VOL. 629, SEPTEMBER 1, 2010 693 Department of Foreign Affair vs. Falcon tion. Under this Amended BOT Agreement, the term Value of the Completed Implementation shall mean the aggregate of all reasonable costs and expenses incurred by the BCA in connection with, in relation to and/or by reason of the MRP/V Project, excluding all interest and capitalized interest, as certified by a reputable and independent accounting firm to be appointed by the BCA and subject to the approval by the DFA, such approval shall not be unreasonably withheld. (2) In the event of termination after completion of design, development, and installation of the MRP/V Project, just compensation shall be paid equivalent to the present value of the net income which the BCA expects to earn or realize during the unexpired or remaining term of this Amended BOT Agreement using the internal rate of return on equity (IRRe) defined in the financial projections of the BCA and agreed upon by the parties, which is attached hereto and made as an integral part of this Amended BOT Agreement as Schedule 1. (Emphases supplied.) The validity of the DFAs termination of the Amended BOT Agreement and the determination of the party or parties in default are issues properly threshed out

in arbitration proceedings as provided for by the agreement itself. However, even if we hypothetically accept BCAs contention that the DFA terminated the Amended BOT Agreement without any default or wrongdoing on BCAs part, it is not indubitable that BCA is entitled to injunctive relief. The BOT Law expressly allows the government to terminate a BOT agreement, even without fault on the part of the project proponent, subject to the payment of the actual expenses incurred by the proponent plus a reasonable rate of return. Under the BOT Law and the Amended BOT Agreement, in the event of default on the part of the government (in this 694

694 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon case, the DFA) or on the part of the proponent, the non-defaulting party is allowed to terminate the agreement, again subject to proper compensation in the manner set forth in the agreement. Time and again, this Court has held that to be entitled to injunctive relief the party seeking such relief must be able to show grave, irreparable injury that is not capable of compensation. In Lopez v. Court of Appeals,77 we held: Generally, injunction is a preservative remedy for the protection of ones substantive right or interest. It is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. It is resorted to only when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. The application of the injunctive writ rests upon the existence of an emergency or of a special reason before the main case can be regularly heard. The essential conditions for granting such temporary injunctive relief are that the complaint alleges facts which appear to be sufficient to constitute a proper basis for injunction and that on the entire showing from the contending parties, the injunction is reasonably necessary to protect the legal rights of the plaintiff pending the litigation. Two requisites are

necessary if a preliminary injunction is to issue, namely, the existence of a right to be protected and the facts against which the injunction is to be directed are violative of said right. In particular, for a writ of preliminary injunction to issue, the existence of the right and the violation must appear in the allegation of the complaint and a preliminary injunction is proper only when the plaintiff (private respondent herein) appears to be entitled to the relief demanded in his complaint. (Emphases supplied.) We reiterated this point in Transfield Philippines, Inc. v. Luzon Hydro Corporation,78 where we likewise opined: _______________

77 379 Phil. 743, 749-750; 322 SCRA 686, 691 (2000). 78 G.R. No. 146717, November 22, 2004, 443 SCRA 307, 336; citing Philippine National Bank v. Ritratto Group, Inc., 414 Phil. 494, 507; 362 SCRA 216, 228 (2001). 695

VOL. 629, SEPTEMBER 1, 2010 695 Department of Foreign Affair vs. Falcon Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right. It must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage. Moreover, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. (Emphasis supplied.) As the Court explained previously in Philippine Airlines, Inc. v. National Labor Relations Commission:79

An injury is considered irreparable if it is of such constant and frequent recurrence that no fair and reasonable redress can be had therefor in a court of law, or where there is no standard by which their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical computation. It is considered irreparable injury when it cannot be adequately compensated in damages due to the nature of the injury itself or the nature of the right or property injured or when there exists no certain pecuniary standard for the measurement of damages. (Emphases supplied.) It is still contentious whether this is a case of termination by the DFA alone or both the DFA and BCA. The DFA contends that BCA, by sending its own Notice of Default, likewise terminated or abandoned the Amended BOT Agreement. Still, whether this is a termination by the DFA alone without fault on the part of BCA or a termination due to default on the part of either party, the BOT Law and the Amended BOT Agreement lay down the measure of compensation to be paid under the appropriate circumstances. Significantly, in BCAs Request for Arbitration with the PDRCI, it prayed for, among others, a judgment ordering _______________

79 351 Phil. 172, 186; 287 SCRA 672, 685 (1998). 696

696 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon respondent [DFA] to pay damages to Claimant [BCA], reasonably estimated at P50,000,000.00 as of [the date of the Request for Arbitration], representing lost business opportunities; financing fees, costs and commissions; travel expenses; legal fees and expenses; and costs of arbitration, including the fees of the arbitrator/s.80 All the purported damages that BCA claims to have suffered by virtue of the DFAs termination of the Amended BOT Agreement are plainly determinable in pecuniary terms and can be reasonably estimated according to BCAs own words.

Indeed, the right of BCA, a party which may or may not have been in default on its BOT contract, to have the termination of its BOT contract reversed is not guaranteed by the BOT Law. Even assuming BCAs innocence of any breach of contract, all the law provides is that BCA should be adequately compensated for its losses in case of contract termination by the government. There is one point that none of the parties has highlighted but is worthy of discussion. In seeking to enjoin the government from awarding or implementing a machine readable passport project or any similar electronic passport or visa project and praying for the maintenance of the status quo ante pending the resolution on the merits of BCAs Request for Arbitration, BCA effectively seeks to enjoin the termination of the Amended BOT Agreement for the MRP/V Project. There is no doubt that the MRP/V Project is a project covered by the BOT Law and, in turn, considered a national government project under Republic Act No. 8795. Under Section 3(d) of that statute, trial courts are prohibited from issuing a TRO or writ of preliminary injunction against the government to restrain or prohibit the termination or rescission of any such national government project/contract. _______________

80 Rollo, p. 266. 697

VOL. 629, SEPTEMBER 1, 2010 697 Department of Foreign Affair vs. Falcon The rationale for this provision is easy to understand. For if a project proponentthat the government believes to be in defaultis allowed to enjoin the termination of its contract on the ground that it is contesting the validity of said termination, then the government will be unable to enter into a new contract with any other party while the controversy is pending litigation. Obviously, a courts grant of injunctive relief in such an instance is prejudicial to public interest since government would be indefinitely hampered in its duty

to provide vital public goods and services in order to preserve the private proprietary rights of the project proponent. On the other hand, should it turn out that the project proponent was not at fault, the BOT Law itself presupposes that the project proponent can be adequately compensated for the termination of the contract. Although BCA did not specifically pray for the trial court to enjoin the termination of the Amended BOT Agreement and thus, there is no direct violation of Republic Act No. 8795, a grant of injunctive relief as prayed for by BCA will indirectly contravene the same statute. Verily, there is valid reason for the law to deny preliminary injunctive relief to those who seek to contest the governments termination of a national government contract. The only circumstance under which a court may grant injunctive relief is the existence of a matter of extreme urgency involving a constitutional issue, such that unless a TRO or injunctive writ is issued, grave injustice and irreparable injury will result. Now, BCA likewise claims that unless it is granted injunctive relief, it would suffer grave and irreparable injury since the bidding out and award of the ePassport Project would be tantamount to a violation of its right against deprivation of property without due process of law under Article III, Section 1 of the Constitution. We are unconvinced. Article III, Section 1 of the Constitution provides [n]o person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. Ordinarily, this constitutional provision 698

698 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon has been applied to the exercise by the State of its sovereign powers such as, its legislative power,81 police power,82 or its power of eminent domain.83 In the instant case, the State action being assailed is the DFAs termination of the Amended BOT Agreement with BCA. Although the said agreement involves a public service that the DFA is mandated to provide and, therefore, is imbued

with public interest, the relationship of DFA to BCA is primarily contractual and their dispute involves the adjudication of contractual rights. The propriety of the DFAs acts, in relation to the termination of the Amended BOT Agreement, should be gauged against the provisions of the contract itself and the applicable statutes to such contract. These contractual and statutory provisions outline what constitutes due process in the present case. In all, BCA failed to demonstrate that there is a constitutional issue involved in this case, much less a constitutional issue of extreme urgency. As for the DFAs purported failure to appropriate sufficient amounts in its budget to pay for liquidated damages to BCA, this argument does not support BCAs position that it will suffer grave and irreparable injury if it is denied injunctive relief. The DFAs liability to BCA for damages is contingent on BCA proving that it is entitled to such damages in the proper proceedings. The DFA has no obligation to set aside funds to pay for liquidated damages, or any other kind of _______________

81 Smith, Bell & Company (Ltd.) v. Natividad, 40 Phil. 136 (1919); Central Bank (now Bangko Sentral ng Pilipinas) Employees Association, Inc. v. Bangko Sentral ng Pilipinas, G.R. No. 148208, December 15, 2004, 446 SCRA 299; Serrano v. Gallant Maritime Services, Inc., G.R. No. 167614, March 24, 2009, 582 SCRA 254. 82 Roxas & Co., Inc. v. Court of Appeals, 378 Phil. 727; 321 SCRA 106 (1999); Kuwait Airways Corporation v. Philippine Airlines, Inc., G.R. No. 156087, May 8, 2009, 587 SCRA 399. 83 Roxas & Co., Inc. v. Court of Appeals, id.; Brgy. Sindalan, San Fernando, Pampanga v. Court of Appeals, G.R. No. 150640, March 22, 2007, 518 SCRA 649. 699

VOL. 629, SEPTEMBER 1, 2010 699 Department of Foreign Affair vs. Falcon

damages, to BCA until there is a final and executory judgment in favor of BCA. It is illogical and impractical for the DFA to set aside a significant portion of its budget for an event that may never happen when such idle funds should be spent on providing necessary services to the populace. For if it turns out at the end of the arbitration proceedings that it is BCA alone that is in default, it would be the one liable for liquidated damages to the DFA under the terms of the Amended BOT Agreement. With respect to BCAs allegation that the e-Passport Project is grossly disadvantageous to the Filipino people since it is the government that will be spending for the project unlike the MRP/V Project which would have been privately funded, the same is immaterial to the issue at hand. If it is true that the award of the e-Passport Project is inimical to the public good or tainted with some anomaly, it is indeed a cause for grave concern but it is a matter that must be investigated and litigated in the proper forum. It has no bearing on the issue of whether BCA would suffer grave and irreparable injury such that it is entitled to injunctive relief from the courts. In all, we agree with petitioners DFA and BSP that the trial courts issuance of a writ of preliminary injunction, despite the lack of sufficient legal justification for the same, is tantamount to grave abuse of discretion. To be very clear, the present decision touches only on the twin issues of (a) the jurisdiction of the trial court to issue a writ of preliminary injunction as an interim relief under the factual milieu of this case; and (b) the entitlement of BCA to injunctive relief. The merits of the DFA and BCAs dispute regarding the termination of the Amended BOT Agreement must be threshed out in the proper arbitration proceedings. The civil case pending before the trial court is purely for the grant of interim relief since the main case is to be the subject of arbitration proceedings. BCAs petition for interim relief before the trial court is essentially a petition for a provisional remedy (i.e., preliminary 700

700 SUPREME COURT REPORTS ANNOTATED Department of Foreign Affair vs. Falcon

injunction) ancillary to its Request for Arbitration in PDRCI Case No. 302006/BGF. BCA specifically prayed that the trial court grant it interim relief pending the constitution of the arbitral tribunal in the said PDRCI case. Unfortunately, during the pendency of this case, PDRCI Case No. 302006/BGF was dismissed by the PDRCI for lack of jurisdiction, in view of the lack of agreement between the parties to arbitrate before the PDRCI.84 In Philippine National Bank v. Ritratto Group, Inc.,85 we held: A writ of preliminary injunction is an ancillary or preventive remedy that may only be resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action. The dismissal of the principal action thus results in the denial of the prayer for the issuance of the writ. x x x. (Emphasis supplied.) In view of intervening circumstances, BCA can no longer be granted injunctive relief and the civil case before the trial court should be accordingly dismissed. However, this is without prejudice to the parties litigating the main controversy in arbitration proceedings, in accordance with the provisions of the Amended BOT Agreement, which should proceed with dispatch. It does not escape the attention of the Court that the delay in the submission of this controversy to arbitration was caused by the ambiguity in Section 19.02 of the Amended BOT Agreement regarding the proper body to which a dispute between the parties may be submitted and the failure of the parties to agree on such an arbitral tribunal. However, this Court cannot allow this impasse to continue indefinitely. The parties involved must sit down together in good faith and finally come to an understanding regarding the constitution of an arbitral tribunal mutually acceptable to them. _______________

84 PDRCI Letter dated March 28, 2007, Rollo, pp. 1856-57. 85 Supra note 78 at p. 507; p. 227. 701

VOL. 629, SEPTEMBER 1, 2010 701

Department of Foreign Affair vs. Falcon WHEREFORE, the instant petition is hereby GRANTED. The assailed Order dated February 14, 2007 of the Regional Trial Court of Pasig in Civil Case No. 71079 and the Writ of Preliminary Injunction dated February 23, 2007 are REVERSED and SET ASIDE. Furthermore, Civil Case No. 71079 is hereby DISMISSED. No pronouncement as to costs. SO ORDERED. Corona (C.J., Chairperson), Velasco, Jr., Del Castillo and Perez, JJ., concur. Petition granted, Order of Regional Trial Court of Pasig City reversed and set aside. Note.The doctrine of hierarchy of courts is one of the structural aspects intended for the orderly administration of justice. (Freedom from Debt Coalition vs. Metropolitan Waterworks and Sewerage System (MWSS), 539 SCRA 621 [2007]) o0o [Department of Foreign Affair vs. Falcon, 629 SCRA 644(2010)] G.R. No. 167057. April 11, 2012.* NERWIN INDUSTRIES CORPORATION, petitioner, vs. PNOC-ENERGY DEVELOPMENT CORPORATION, and ESTER R. GUERZON, Chairman, Bids and Awards Committee, respondents. Remedial Law; Provisional Remedies; Preliminary Injunction; A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or person, to refrain from a particular act or acts.A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or person, to refrain from a particular act or acts. It is an ancillary or preventive remedy resorted to by a litigant to protect or preserve his rights or interests during the pendency of the case. As such, it is issued only when it is established that: (a) The applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; or (b) The commission, continuance or non-performance of the act

or acts complained of during the litigation would probably work injustice to the applicant; or (c) A party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual. Same; Same; Same; Judges dealing with applications for the injunctive relief ought to be wary of improvidently or unwarrantedly issuing Temporary Restraining Orders (TROs) or writs of injunction that tend to dispose of the merits without or before trial; It is but a preventive remedy whose only mission is to prevent threatened wrong, further injury, and irreparable harm or injustice until the rights of the parties can be settled.Judges dealing with applications for the injunctive relief ought to be wary of improvidently or unwarrantedly issuing TROs or writs of injunction that tend to dispose of the merits _______________ * FIRST DIVISION. 174

174 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation without or before trial. Granting an application for the relief in disregard of that tendency is judicially impermissible, for it is never the function of a TRO or preliminary injunction to determine the merits of a case, or to decide controverted facts. It is but a preventive remedy whose only mission is to prevent threatened wrong, further injury, and irreparable harm or injustice until the rights of the parties can be settled. Judges should thus look at such relief only as a means to protect the ability of their courts to render a meaningful decision. Foremost in their minds should be to guard against a change of circumstances that will hamper or prevent the granting of proper reliefs after a trial on the merits. It is well worth remembering that the writ of preliminary injunction should issue only to prevent the threatened continuous and irremediable injury to the applicant before the claim can be justly and thoroughly studied and adjudicated.

PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Ronaldo S. Tagalog for petitioner. Medado, Sinsuat & Associates for respondents. BERSAMIN, J.:

Republic Act No. 89751 expressly prohibits any court, except the Supreme Court, from issuing any temporary restraining order (TRO), preliminary injunction, or preliminary mandatory injunction to restrain, prohibit or compel the Government, or any of its subdivisions or officials, or any person or entity, whether public or private, acting under the Governments direction, from: (a) acquiring, clearing, and developing the right-of-way, site or location of any National Government _______________ 1 An Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions or Preliminary Mandatory Injunctions, Providing Penalties for Violations thereof, and for Other Purposes. 175

VOL. 669, APRIL 11, 2012 175 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation project; (b) bidding or awarding of a contract or project of the National Government; (c) commencing, prosecuting, executing, implementing, or operating any such contract or project; (d) terminating or rescinding any such contract or project; and (e) undertaking or authorizing any other lawful activity necessary for such contract or project. Accordingly, a Regional Trial Court (RTC) that ignores the statutory prohibition and issues a TRO or a writ of preliminary injunction or preliminary mandatory injunction against a government contract or project acts contrary to law.

Antecedents

The following antecedents are culled from the assailed decision of the Court of Appeals (CA) promulgated on October 22, 2004,2 viz.: In 1999, the National Electrification Administration (NEA) published an invitation to pre-qualify and to bid for a contract, otherwise known as IPB No. 80, for the supply and delivery of about sixty thousand (60,000) pieces of woodpoles and twenty thousand (20,000) pieces of crossarms needed in the countrys Rural Electrification Project. The said contract consisted of four (4) components, namely: PIA, PIB and PIC or woodpoles and P3 or crossarms, necessary for NEAs projected allocation for Luzon, Visayas and Mindanao. In response to the said invitation, bidders, such as private respondent [Nerwin], were required to submit their application for eligibility together with their technical proposals. At the same time, they were informed that only those who would pass the standard pre-qualification would be invited to submit their financial bids. Following a thorough review of the bidders qualifications and eligibility, only four (4) bidders, including private respondent [Nerwin], qualified to participate in the bidding for the IPB-80 contract. Thereafter, the qualified bidders submitted their financial bids _______________ 2 Rollo, pp. 11-21; penned by Associate Justice Magdangal M. De Leon, and concurred in by Associate Justices Romeo A. Brawner (later Presiding Justice) and Associate Justice Mariano C. Del Castillo (now a Member of this Court). 176

176 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation where private respondent [Nerwin] emerged as the lowest bidder for all schedules/components of the contract. NEA then conducted a pre-award inspection of private respondents [Nerwins] manufacturing plants and

facilities, including its identified supplier in Malaysia, to determine its capability to supply and deliver NEAs requirements. In the Recommendation of Award for Schedules PIA, PIB, PIC and P3-IBP No. 80 [for the] Supply and Delivery of Woodpoles and Crossarms dated October 4, 2000, NEA administrator Conrado M. Estrella III recommended to NEAs Board of Directors the approval of award to private respondent [Nerwin] of all schedules for IBP No. 80 on account of the following: a. Nerwin is the lowest complying and responsive bidder;

b. The price difference for the four (4) schedules between the bid of Nerwin Industries (lowest responsive and complying bidder) and the second lowest bidder in the amount of $1.47 million for the poles and $0.475 million for the crossarms, is deemed substantial and extremely advantageous to the government. The price difference is equivalent to 7,948 pcs. of poles and 20.967 pcs. of crossarms; c. The price difference for the three (3) schedules between the bids of Nerwin and the Tri-State Pole and Piling, Inc. approximately in the amount of $2.36 million for the poles and $0.475 million for the crossarms are equivalent to additional 12.872 pcs. of poles and 20.967 pcs. of crossarms; and d. The bidder and manufacturer are capable of supplying the woodpoles and specified in the bid documents and as based on the pre-award inspection conducted. However, on December 19, 2000, NEAs Board of Directors passed Resolution No. 32 reducing by 50% the material requirements for IBP No. 80 given the time limitations for the delivery of the materials, xxx, and with the loan closing date of October 2001 fast approaching. In turn, it resolved to award the four (4) schedules of IBP No. 80 at a reduced number to private respondent [Nerwin]. Private respondent [Nerwin] protested the said 50% reduction, alleging that the same was a ploy to accommodate a losing bidder. On the other hand, the losing bidders Tri State and Pacific Synnergy appeared to have filed a complaint, citing alleged false or falsified documents submitted during the pre-qualification stage 177

VOL. 669, APRIL 11, 2012 177 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation which led to the award of the IBP-80 project to private respondent [Nerwin]. Thus, finding a way to nullify the result of the previous bidding, NEA officials sought the opinion of the Government Corporate Counsel who, among others, upheld the eligibility and qualification of private respondent [Nerwin]. Dissatisfied, the said officials attempted to seek a revision of the earlier opinion but the Government Corporate Counsel declared anew that there was no legal impediment to prevent the award of IPB-80 contract to private respondent [Nerwin]. Notwithstanding, NEA allegedly held negotiations with other bidders relative to the IPB-80 contract, prompting private respondent [Nerwin] to file a complaint for specific performance with prayer for the issuance of an injunction, which injunctive application was granted by Branch 36 of RTCManila in Civil Case No. 01102000. In the interim, PNOC-Energy Development Corporation purporting to be under the Department of Energy, issued Requisition No. FGJ 30904R1 or an invitation to pre-qualify and to bid for wooden poles needed for its Samar Rural Electrification Project (O-ILAW project). Upon learning of the issuance of Requisition No. FGJ 30904R1 for the O-ILAW Project, Nerwin filed a civil action in the RTC in Manila, docketed as Civil Case No. 03106921 entitled Nerwin Industries Corporation v. PNOC-Energy Development Corporation and Ester R. Guerzon, as Chairman, Bids and Awards Committee, alleging that Requisition No. FGJ 30904R1 was an attempt to subject a portion of the items covered by IPB No. 80 to another bidding; and praying that a TRO issue to enjoin respondents proposed bidding for the wooden poles. Respondents sought the dismissal of Civil Case No. 03106921, stating that the complaint averred no cause of action, violated the rule that government infrastructure projects were not to be subjected to TROs, contravened the mandatory prohibition against non-forum shopping, and the cor178

178 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation porate president had no authority to sign and file the complaint.3 On June 27, 2003, after Nerwin had filed its rejoinder to respondents reply, the RTC granted a TRO in Civil Case No. 03106921.4On July 30, 2003, the RTC issued an order,5 as follows: WHEREFORE, for the foregoing considerations, an order is hereby issued by this Court: 1. 2. DENYING the motion to consolidate; DENYING the urgent motion for reconsideration;

3. DISQUALIFYING Attys. Michael A. Medado, Datu Omar S. Sinsuat and Mariano H. Paps from appearing as counsel for the defendants; 4. 5. DECLARING defendants in default; GRANTING the motion for issuance of writ of preliminary injunction.

Accordingly, let a writ of preliminary injunction issue enjoining the defendant PNOC-EDC and its Chairman of Bids and Awards Committee Esther R. Guerzon from continuing the holding of the subject bidding upon the plaintiffs filing of a bond in the amount of P200,000.00 to answer for any damage or damages which the defendants may suffer should it be finally adjudged that petitioner is not entitled thereto, until final determination of the issue in this case by this Court. This order shall become effective only upon the posting of a bond by the plaintiffs in the amount of P200,000.00. Let a copy of this order be immediately served on the defendants and strict compliance herein is enjoined. Furnish the Office of the Government Corporate Counsel copy of this order. SO ORDERED. _______________ 3 Id., at p. 14.

4 Id., at pp. 14-15. 5 Id., at p. 15. 179

VOL. 669, APRIL 11, 2012 179 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation Respondents moved for the reconsideration of the order of July 30, 2003, and also to set aside the order of default and to admit their answer to the complaint. On January 13, 2004, the RTC denied respondents motions reconsideration, to set aside order of default, and to admit answer.6 for

Thence, respondents commenced in the Court of Appeals (CA) a special civil action for certiorari (CA-GR SP No. 83144), alleging that the RTC had thereby committed grave abuse of discretion amounting to lack or excess of jurisdiction in holding that Nerwin had been entitled to the issuance of the writ of preliminary injunction despite the express prohibition from the law and from the Supreme Court; in issuing the TRO in blatant violation of the Rules of Court and established jurisprudence; in declaring respondents in default; and in disqualifying respondents counsel from representing them.7 On October 22, 2004, the CA promulgated its decision,8to wit: WHEREFORE, the petition is GRANTED. The assailed Orders dated July 30 and December 29, 2003 are hereby ANNULED and SET ASIDE. Accordingly, Civil Case No. 03106921, private respondents complaint for issuance of temporary restraining order/writ of preliminary injunction before Branch 37 of the Regional Trial Court of Manila, is DISMISSED for lack of merit. SO ORDERED. Nerwin filed a motion for reconsideration, but the CA denied the motion on February 9, 2005.9 _______________

6 Id., at p. 16. 7 Id., at p. 60. 8 Supra, note 2. 9 Rollo, pp. 67-69; penned by Associate Justice Magdangal De Leon, and concurred in by Associate Justice Brawner and Associate Justice Del Castillo. 180

180 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation Issues Hence, Nerwin appeals, raising the following issues: I. Whether or not the CA erred in dismissing the case on the basis of Rep. Act 8975 prohibiting the issuance of temporary restraining orders and preliminary injunctions, except if issued by the Supreme Court, on government projects. II. Whether or not the CA erred in ordering the dismissal of the entire case on the basis of Rep. Act 8975 which prohibits the issuance only of a preliminary injunction but not injunction as a final remedy. III. Whether or not the CA erred in dismissing the case considering that it is also one for damages. Ruling

The petition fails. In its decision of October 22, 2004, the CA explained why it annulled and set aside the assailed orders of the RTC issued on July 20, 2003 and December 29, 2003, and why it altogether dismissed Civil Case No. 03106921, as follows: It is beyond dispute that the crux of the instant case is the propriety of respondent Judges issuance of a preliminary injunction, or the earlier TRO, for that matter.

Respondent Judge gravely abused his discretion in entertaining an application for TRO/preliminary injunction, and worse, in issuing a preliminary injunction through the assailed order enjoining petitioners sought bidding for its O-ILAW Project. The same is a palpable violation of RA 8975 which was approved on November 7, 2000, thus, already existing at the time respondent Judge issued the assailed Orders dated July 20 and December 29, 2003. Section 3 of RA 8975 states in no uncertain terms, thus: Prohibition on the Issuance of temporary Restraining Order, Preliminary Injunctions and Preliminary Mandatory Injunctions.No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or pre181

VOL. 669, APRIL 11, 2012 181 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation liminary mandatory injunction against the government, or any of its subdivisions, officials, or any person or entity, whether public or private, acting under the governments direction, to restrain, prohibit or compel the following acts: xxx (b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof; xxx This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. xxx The said proscription is not entirely new. RA 8975 merely supersedes PD 1818 which earlier underscored the prohibition to courts from issuing restraining

orders or preliminary injunctions in cases involving infrastructure or National Resources Development projects of, and public utilities operated by, the government. This law was, in fact, earlier upheld to have such a mandatory nature by the Supreme Court in an administrative case against a Judge. Moreover, to bolster the significance of the said prohibition, the Supreme Court had the same embodied in its Administrative Circular No. 11-2000 which reiterates the ban on issuance of TRO or writs of Preliminary Prohibitory or Mandatory Injunction in cases involving Government Infrastructure Projects. Pertinent is the ruling in National Housing Authority vs. Allarde As regards the definition of infrastructure projects, the Court stressed in Republic of the Phil. vs. Salvador Silverio and Big Bertha Construction: The term infrastructure projects means construction, improvement and rehabilitation of roads, and bridges, railways, airports, seaports, communication facilities, irrigation, flood control and drainage, water supply and sewerage systems, shore protection, power facilities, national buildings, school buildings, hospital buildings and other related construction projects that form part of the government capital investment. 182

182 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation Thus, there is nothing from the law or jurisprudence, or even from the facts of the case, that would justify respondent Judges blatant disregard of a simple, comprehensible and unequivocal mandate (of PD 1818) prohibiting the issuance of injunctive writs relative to government infrastructure projects. Respondent Judge did not even endeavor, although expectedly, to show that the instant case falls under the single exception where the said proscription may not apply, i.e., when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. Respondent Judge could not have legally declared petitioner in default because, in the first place, he should not have given due course to private respondents complaint for injunction. Indubitably, the assailed orders were

issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Perforce, this Court no longer sees the need to resolve the other grounds proffered by petitioners.10 The CAs decision was absolutely correct. The RTC gravely abused its discretion, firstly, when it entertained the complaint of Nerwin against respondents notwithstanding that Nerwin was thereby contravening the express provisions of Section 3 and Section 4 of Republic Act No. 8975 for its seeking to enjoin the bidding out by respondents of the O-ILAW Project; and, secondly, when it issued the TRO and the writ of preliminary prohibitory injunction. Section 3 and Section 4 of Republic Act No. 8975 provide: Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions.No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private, acting under the governments direction, to restrain, prohibit or compel the following acts: _______________ 10 Bold underscoring is part of original text. 183

VOL. 669, APRIL 11, 2012 183 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation (a) Acquisition, clearance and development of the right-of-way and/or site or location of any national government project; (b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof;

(c) Commencement, prosecution, execution, implementation, operation of any such contract or project; (d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project. This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought. If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice to any liability that the guilty party may incur under existing laws. Section 4. Nullity of Writs and Orders.Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and effect. The text and tenor of the provisions being clear and unambiguous, nothing was left for the RTC to do except to enforce them and to exact upon Nerwin obedience to them. The RTC could not have been unaware of the prohibition under Republic Act No. 8975 considering that the Court had itself instructed all judges and justices of the lower courts, through Administrative Circular No. 11-2000, to comply with and respect the prohibition against the issuance of TROs or writs 184

184 SUPREME COURT REPORTS ANNOTATED

Nerwin Industries Corporation vs. PNOC-Energy Development Corporation of preliminary prohibitory or mandatory injunction involving contracts and projects of the Government. It is of great relevance to mention at this juncture that Judge Vicente A. Hidalgo, the Presiding Judge of Branch 37 of the RTC, the branch to which Civil Case No. 03106921 had been raffled, was in fact already found administratively liable for gross misconduct and gross ignorance of the law as the result of his issuance of the assailed TRO and writ of preliminary prohibitory injunction. The Court could only fine him in the amount of P40,000.00 last August 6, 2008 in view of his intervening retirement from the service. That sanction was meted on him in A.M. No. RTJ-08-2133 entitled Sinsuat v. Hidalgo,11 where this Court stated: The Court finds that, indeed, respondent is liable for gross misconduct. As the CA explained in its above-stated Decision in the petition for certiorari, respondent failed to heed the mandatory ban imposed by P.D. No. 1818 and R.A. No. 8975 against a government infrastructure project, which the rural electrification project certainly was. He thereby likewise obstinately disregarded this Courts various circulars enjoining courts from issuing TROs and injunctions against government infrastructure projects in line with the proscription under R.A. No. 8975. Apropos are Gov. Garcia v. Hon. Burgos and National Housing Authority v. Hon. Allarde wherein this Court stressed that P.D. No. 1818 expressly deprives courts of jurisdiction to issue injunctive writs against the implementation or execution of a government infrastructure project. Reiterating the prohibitory mandate of P.D. No. 1818, the Court in Atty. Caguioa v. Judge Lavia faulted a judge for grave misconduct for issuing a TRO against a government infrastructure project thus: xxx It appears that respondent is either feigning a misunderstanding of the law or openly manifesting a contumacious indifference thereto. In any case, his disregard of the clear mandate of PD 1818, as well as of the Supreme Court Circulars enjoining strict compliance therewith, constitutes _______________ 11 561 SCRA 38 (2008). 185

VOL. 669, APRIL 11, 2012 185 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation grave misconduct and conduct prejudicial to the proper administration of justice. His claim that the said statute is inapplicable to his January 21, 1997 Order extending the dubious TRO is but a contrived subterfuge to evade administrative liability. In resolving matters in litigation, judges should endeavor assiduously to ascertain the facts and the applicable laws. Moreover, they should exhibit more than just a cursory acquaintance with statutes and procedural rules. Also, they are expected to keep abreast of and be conversant with the rules and the circulars which the Supreme Court has adopted and which affect the disposition of cases before them. Although judges have in their favor the presumption of regularity and good faith in the performance of their judicial functions, a blatant disregard of the clear and unmistakable terms of the law obviates this presumption and renders them susceptible to administrative sanctions. (Emphasis and underscoring supplied) The pronouncements in Caguioa apply as well to respondent. The questioned acts of respondent also constitute gross ignorance of the law for being patently in disregard of simple, elementary and well-known rules which judges are expected to know and apply properly. IN FINE, respondent is guilty of gross misconduct and gross ignorance of the law, which are serious charges under Section 8 of Rule 140 of the Rules of Court. He having retired from the service, a fine in the amount of P40,000 is imposed upon him, the maximum amount fixed under Section 11 of Rule 140 as an alternative sanction to dismissal or suspension.12 Even as the foregoing outcome has rendered any further treatment and discussion of Nerwins other submissions superfluous and unnecessary, the Court notes that the RTC did _______________

12 Sinsuat v. Hidalgo, A.M. No. RTJ-08-2133, August 6, 2008, 561 SCRA 38, 48-50. 186

186 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation not properly appreciate the real nature and true purpose of the injunctive remedy. This failing of the RTC presses the Court to use this decision to reiterate the norms and parameters long standing jurisprudence has set to control the issuance of TROs and writs of injunction, and to now insist on conformity to them by all litigants and lower courts. Only thereby may the grave misconduct committed in Civil Case No. 03106921 be avoided. A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or person, to refrain from a particular act or acts.13 It is an ancillary or preventive remedy resorted to by a litigant to protect or preserve his rights or interests during the pendency of the case. As such, it is issued only when it is established that: (a) The applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; or (b) The commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) A party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.14 The existence of a right to be protected by the injunctive relief is indispensable. In City Government of Butuan v. Con-

_______________ 13 Sec. 1, Rule 58, 1997 Rules of Civil Procedure. 14 Sec. 3, Rule 58, 1997 Rules of Civil Procedure. 187

VOL. 669, APRIL 11, 2012 187 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation solidated Broadcasting System (CBS), Inc.,15 the Court elaborated on this requirement, viz.: As with all equitable remedies, injunction must be issued only at the instance of a party who possesses sufficient interest in or title to the right or the property sought to be protected. It is proper only when the applicant appears to be entitled to the relief demanded in the complaint, which must aver the existence of the right and the violation of the right, or whose averments must in the minimum constitute a prima facie showing of a right to the final relief sought. Accordingly, the conditions for the issuance of the injunctive writ are: (a) that the right to be protected exists prima facie; (b) that the act sought to be enjoined is violative of that right; and (c) that there is an urgent and paramount necessity for the writ to prevent serious damage. An injunction will not issue to protect a right not in esse, or a right which is merely contingent and may never arise; or to restrain an act which does not give rise to a cause of action; or to prevent the perpetration of an act prohibited by statute. Indeed, a right, to be protected by injunction, means a right clearly founded on or granted by law or is enforceable as a matter of law.16 Conclusive proof of the existence of the right to be protected is not demanded, however, for, as the Court has held in Saulog v. Court of Appeals,17 it is enough that: xxx for the court to act, there must be an existing basis of facts affording a present right which is directly threatened by an act sought to be enjoined. And while a clear showing of the right claimed is necessary, its existence need not be conclusively established. In fact, the evidence to be submitted to justify

preliminary injunction at the hearing thereon need not be conclusive or complete but need only be a sampling intended _______________ 15 G.R. No. 157315, December 1, 2010, 636 SCRA 320. 16 City Government of Butuan v. Consolidated Broadcasting System (BS), Inc., G.R. No. 157315, December 1, 2010, 636 SCRA 320, 336-337 (Bold emphasis supplied). 17 Saulog v. Court of Appeals, G.R. No. 119769, September 18, 1996, 262 SCRA 51. 188

188 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation merely to give the court an idea of the justification for the preliminary injunction pending the decision of the case on the merits. This should really be so since our concern here involves only the propriety of the preliminary injunction and not the merits of the case still pending with the trial court. Thus, to be entitled to the writ of preliminary injunction, the private respondent needs only to show that it has the ostensible right to the final relief prayed for in its complaint xxx.18 In this regard, the Rules of Court grants a broad latitude to the trial courts considering that conflicting claims in an application for a provisional writ more often than not involve and require a factual determination that is not the function of the appellate courts.19 Nonetheless, the exercise of such discretion must be sound, that is, the issuance of the writ, though discretionary, should be upon the grounds and in the manner provided by law.20 When that is done, the exercise of sound discretion by the issuing court in injunctive matters must not be interfered with except when there is manifest abuse.21 Moreover, judges dealing with applications for the injunctive relief ought to be wary of improvidently or unwarrantedly issuing TROs or writs of injunction that tend to dispose of the merits without or before trial. Granting an

application for the relief in disregard of that tendency is judicially impermissible,22 for it is never the function of a TRO or preliminary in_______________ 18 Id., at p. 60 (Bold emphasis supplied). 19 Urbanes, Jr. v. Court of Appeals, G.R. No. 117964, March 28, 2001, 355 SCRA 537, 548. 20 Republic Telecommunications Holdings, Inc. v. Court of Appeals, G.R. No. 135074, January 29, 1999, 302 SCRA 403, 409. 21 Searth Commodities Corp. v. Court of Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622, 628; S & A Gaisano, Inc. v. Judge Hidalgo, G.R. No. 80397, December 10, 1990, 192 SCRA 224, 229; Genoblazo v. Court of Appeals, G.R. No. 79303, June 20, 1989, 174 SCRA 124, 133. 22 Searth Commodities Corporation v. Court of Appeals, G.R. No. 64220, March 31, 1992, 207 SCRA 622, 629-630; Rivas v. Securi189

VOL. 669, APRIL 11, 2012 189 Nerwin Industries Corporation vs. PNOC-Energy Development Corporation junction to determine the merits of a case,23 or to decide controverted facts.24 It is but a preventive remedy whose only mission is to prevent threatened wrong,25 further injury,26 and irreparable harm27 or injustice28 until the rights of the parties can be settled. Judges should thus look at such relief only as a means to protect the ability of their courts to render a meaningful decision.29 Foremost in their minds should be to guard against a change of circumstances that will hamper or pre_______________ ties and Exchange Commission, G.R. No. 53772, October 4, 1990, 190 SCRA 295, 305; Government Service Insurance System v. Florendo, G.R. No. 48603, September 29, 1989, 178 SCRA 76, 88-89; Ortigas v. Co. Ltd. Partnership v. Court of Appeals, No. L-79128, June 16, 1988, 162 SCRA 165, 169.

23 43 CJS Injunctions 5, citing B. W. Photo Utilities v. Republic Molding Corporation, C. A. Cal., 280 F. 2d 806; Duckworth v. James, C. A. Va. 267 F. 2d 224; Westinghouse Electric Corporation v. Free Sewing Machine Co., C. A. Ill, 256 F. 2d 806. 24 43 CJS Injunctions 5, citing Lonergan v. Crucible Steel Co. of America, 229 N. E. 2d 536, 37 Ill. 2d 599; Compton v. Paul K. Harding Realty Co., 285 N.E. 2d 574, 580. 25 Doeskin Products, Inc. v. United Paper Co., C. A. Ill., 195 F. 2d 356; Benson Hotel Corp. v. Woods, C. C. A. Minn., 168 F. 2d 694; Spickerman v. Sproul, 328 P. 2d 87, 138 Colo. 13; United States v. National Plastikwear Fashions, 368 F. 2d 845. 26 Career Placement of White Plains, Inc. v. Vaus, 354 N. Y. S. 2d 764, 77 Misc. 2d 788; Toushin v. City of Chicago, 320 N. E. 2d 202, 23 Ill. App. 3d 797; H. K. H. Development Corporation v. Metropolitan Sanitary District of Greater Chicago, 196 N. E., 2d 494, 47 Ill. App. 46. 27 Exhibitors Poster Exchange, Inc. v. National Screen Service Corp., C. A. La., 441 F. 2d 560; Marine Cooks & Stewards, AFL v. Panama S. S. Co., C. A. Wash., 362 U.S. 365. 28 City of Cleveland v. Division 268 of Amalgamated Association of St. Elec. Ry. & Motor Coach Emp. Of America, 81. N. E. 2d 310, 84 Ohio App. 43; Slott v. Plastic Fabricators, Inc., 167 A. 2d 306, 402 Pa. 433. 29 Meis v. Sanitas Service Corporation, C. A. Tex., 511 F. 2d 655; Gobel v. Laing, 12 Ohio App. 2d 93. 190

190 SUPREME COURT REPORTS ANNOTATED Nerwin Industries Corporation vs. PNOC-Energy Development Corporation vent the granting of proper reliefs after a trial on the merits.30 It is well worth remembering that the writ of preliminary injunction should issue only to prevent the threatened continuous and irremediable injury to the applicant before the claim can be justly and thoroughly studied and adjudicated.31

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals; and ORDERS petitioner to pay the costs of suit. The Court Administrator shall disseminate this decision to the lower courts for their guidance. SO ORDERED. Corona (C.J., Chairperson), Leonardo-De Castro, Brion** and Villarama, Jr., JJ., concur. Judgment affirmed. Notes.A Temporary Restraining Order (TRO) is an interlocutory order or writ issued by the court as a restraint on the defendant until the propriety of granting an injunction can be determined, thus going no further in its operation than to preserve the status quo until that determination. (Subic Bay Metropolitan Authority vs. Rodriguez, 619 SCRA 176 [2010]) The primary objective of a preliminary injunction is to preserve the status quo until the merits of the case can be heard. (Castro vs. Dela Cruz, 639 SCRA 187 [2011]) o0o _______________ 30 United States v. Adlers Creamery, C. C. A. N. Y., 107 F. 2d 987; American Mercury v. Kiely, C. C. A. N. Y., 19 F. 2d 295. 31 Republic v. Silerio, G.R. No. 108869, May 6, 1997, 272 SCRA 280, 287. ** Vice Associate Justice Mariano C. Del Castillo who concurred with the decision of the Court of Appeals, pursuant to the raffle of April 11, 2012. [Nerwin Industries Corporation vs. PNOC-Energy Development Corporation, 669 SCRA 173(2012)] 544 SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista

G.R. No. 156015. August 11, 2005.*

REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his capacity as former Chief of the Intelligence Service, Armed Forces of the Philippines (ISAFP), and former Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his capacity as an Officer of ISAFP and former member of the PSG, petitioners, vs. HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul Gutierrez, respondents. Agency; A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the principal on his agent.Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to _______________

* SECOND DIVISION. 545

VOL. 466, AUGUST 11, 2005 545 Republic vs. Evangelista render some service or do something in representation or on behalf of another, known as the principal, with the consent or authority of the latter. A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the agent ceases when the will or permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will. Same; An exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency.An exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency. The reason for its

irrevocability is because the agency becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of the agent and third persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the principal. Same; When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement.In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to manage the treasure hunting activities in the subject land; to file any case against anyone who enters the land without authority from Legaspi; to engage the services of lawyers to carry out the agency; and, to dig for any treasure within the land and enter into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be found in the land. Pursuant to this authority and to protect Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case for damages and injunction against petitioners. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered in the subject land. It is clear that the treasure that may be found in the land is the subject matter 546

546 SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista of the agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the land. This bilateral contract depends on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the principal Legaspi. When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency

ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement. Consequently, the Deed of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected. Injunction; Preliminary Injunction; Requisites; A writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action.We hold that the issuance of the writ of preliminary injunction is justified. A writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action. It is issued by the court to prevent threatened or continuous irremediable injury to the applicant before his claim can be thoroughly studied and adjudicated. Its aim is to preserve the status quo ante until the merits of the case can be heard fully, upon the applicants showing of two important conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the acts sought to be enjoined are violative of that right. Same; Same; Evidence; At the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is needed to establish the applicants rights or interests in the subject matter of the main actionthe applicant is required only to show that he has an ostensible right to the final relief prayed for in his complaint.It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is needed to establish the applicants rights or interests in the subject matter of the main action. It is not required that the applicant should conclusively show that there was a violation of his rights as this issue will still be fully litigated in the main case. Thus, an applicant for a writ is required 547

VOL. 466, AUGUST 11, 2005 547 Republic vs. Evangelista only to show that he has an ostensible right to the final relief prayed for in his complaint.

Courts; Judges; Bias and Partiality; A judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or the correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the part of the judge, is not sufficient to show bias or partiality; To be disqualifying, it must be shown that the bias and prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case.We have carefully examined the records and we find no sufficient basis to hold that respondent judge should have recused himself from hearing the case. There is no discernible pattern of bias on the rulings of the respondent judge. Bias and partiality can never be presumed. Bare allegations of partiality will not suffice in an absence of a clear showing that will overcome the presumption that the judge dispensed justice without fear or favor. It bears to stress again that a judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or the correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the part of respondent judge, is not sufficient to show bias or partiality. As we held in the case of Webb vs. People, the adverse and erroneous rulings of a judge on the various motions of a party do not sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that the bias and prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as based on the evidence adduced, do not prove bias or prejudice. We also emphasized that repeated rulings against a litigant, no matter how erroneously, vigorously and consistently expressed, do not amount to bias and prejudice which can be a bases for the disqualification of a judge. PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. The Solicitor General for petitioner. 548

548

SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista Homobono Adaza for private respondent. Rashid A. Saber for Intervenor. PUNO, J.:

The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of preliminary injunction, filed by private respondent Dante Legaspi, through his attorney-in-fact Paul Gutierrez, against petitioners Gen. Jose M. Calimlim, Ciriaco Reyes and Maj. David Diciano before the Regional Trial Court (RTC) of Quezon City.1 The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte, Norzagaray, Bulacan. In November 1999, petitioner Calimlim, representing the Republic of the Philippines, and as then head of the Intelligence Service of the Armed Forces of the Philippines and the Presidential Security Group, entered into a Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness.2 It was further alleged that thereafter, Reyes, together with petitioners, started, digging, tunneling and blasting works on the said land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about 80 military personnel to guard the area and encamp thereon to intimidate Legaspi and other occupants of the area from going near the subject land. On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting activities on Legaspis land and to file charges against those who may _______________

1 Complaint, dated February 29, 2000; Rollo, pp. 84-90. 2 Petitioners have since retired from government service. 549

VOL. 466, AUGUST 11, 2005 549 Republic vs. Evangelista enter it without the latters authority.3 Legaspi agreed to give Gutierrez 40% of the treasure that may be found in the land. On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally entering Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspis share in whatever treasure may be found in the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per court hearing and defray all expenses for the cost of the litigation.4 Upon the filing of the complaint, then Executive Judge Perlita J. Tria Tirona issued a 72-hour temporary restraining order (TRO) against petitioners. The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by public respondent Judge Victorino P. Evangelista. On March 2, 2000, respondent judge issued another 72-hour TRO and a summary hearing for its extension was set on March 7, 2000. On March 14, 2000, petitioners filed a Motion to Dismiss6 contending: first, there is no real party-in-interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of Revocation,7 and, second, Gutierrez failed to establish that the alleged armed men guarding the area were acting on orders of petitioners. On March 17, 2000, petitioners also filed a Motion for Inhibition8 of the respondent judge on the ground of alleged partiality in favor of private respondent. On March 23, 2000, the trial court granted private respondents application for a writ of preliminary injunction on the _______________

3 Rollo, p. 91. 4 Rollo, p. 177.

5 Docketed as Civil Case No. Q-00-40115. 6 Rollo, pp. 95-103. 7 Revocation of SPA, Rollo, p. 92. 8 Rollo, pp. 105-122. 550

550 SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista following grounds: (1) the diggings and blastings appear to have been made on the land of Legaspi, hence, there is an urgent need to maintain the status quo to prevent serious damage to Legaspis land; and, (2) the SPA granted to Gutierrez continues to be valid.9 The trial court ordered thus: WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiffs application for a writ of preliminary injunction. Upon plaintiffs filing of an injunction bond in the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00), let a Writ of Preliminary Injunction issue enjoining the defendants as well as their associates, agents or representatives from continuing to occupy and encamp on the land of the plaintiff LEGASPI as well as the vicinity thereof; from digging, tunneling and blasting the said land of plaintiff LEGASPI; from removing whatever treasure may be found on the said land; from preventing and threatening the plaintiffs and their representatives from entering the said land and performing acts of ownership; from threatening the plaintiffs and their representatives as well as plaintiffs lawyer. On even date, the trial court issued another Order10 denying petitioners motion to dismiss and requiring petitioners to answer the complaint. On April 4, 2000, it likewise denied petitioners motion for inhibition.11 On appeal, the Court of Appeals affirmed the decision of the trial court.12 Hence this petition, with the following assigned errors: I

WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY LEGASPI. _______________

9 Order, dated March 23, 2000, Rollo, pp. 124-127. 10 Order, dated March 23, 2000, Rollo, pp. 128-130. 11 Rollo, pp. 131-132. 12 Decision, dated November 8, 2000, penned by Associate Justice Eubulo G. Verzola and concurred in by Associate Justices Marina L. Buzon and Perlita J. Tria-Tirona; Rollo, pp. 72-80. 551

VOL. 466, AUGUST 11, 2005 551 Republic vs. Evangelista II

WHETHER THE DISMISSED. III

COMPLAINT

AGAINST

PETITIONERS

SHOULD

BE

WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER PROCEEDING WITH THE CASE. We find no merit in the petition. On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent Legaspi has already been revoked by the latter. Private

respondent Gutierrez, however, contends that the unilateral revocation is invalid as his agency is coupled with interest. We agree with private respondent. Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service or do something in representation or on behalf of another, known as the principal, with the consent or authority of the latter.13 A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the agent ceases when the will or permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will.14 However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency.15 The reason for its irrevocability is because the agency becomes part of another obligation or agreement. It is not solely the rights of the principal _______________

13 Saums v. Parfet, 270 Mich. 165, 258 N.W. 235. 14 Agency, Vicente J. Francisco, p. 353. 15 Art. 1927, Civil Code. 552

552 SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista but also that of the agent and third persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the principal.

In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by Legaspi to Gutierrez is coupled with interest as a bilateral contract depends on it. It is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to manage the treasure hunting activities in the subject land; to file any case against anyone who enters the land without authority from Legaspi; to engage the services of lawyers to carry out the agency; and, to dig for any treasure within the land and enter into agreements relative thereto. It was likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be found in the land. Pursuant to this authority and to protect Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case for damages and injunction against petitioners. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in whatever treasure may be recovered in the subject land. It is clear that the treasure that may be found in the land is the subject matter of the agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the land. This bilateral contract depends on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the principal Legaspi.16 When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement.17 _______________

16 Cox v. Freeman, 1951 OK 16, 204 Okla. 138, 227 P. 2d 670. 17 Civil Code of the Philippines Annotated, Ambrosio Padilla, 1987 ed., Vol. VI, p. 447. 553

VOL. 466, AUGUST 11, 2005 553 Republic vs. Evangelista

Consequently, the Deed of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected. On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action.18 It is issued by the court to prevent threatened or continuous irremediable injury to the applicant before his claim can be thoroughly studied and adjudicated.19 Its aim is to preserve the status quo ante until the merits of the case can be heard fully, upon the applicants showing of two important conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the acts sought to be enjoined are violative of that right.20 Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary injunction may be issued when it is established: (a) that the applicant is entitled to the relief demanded, the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) that the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) that a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or _______________

18 Philippine National Bank v. Ritratto Group, Inc., 362 SCRA 216 (2001). 19 Republic of the Philippines v. Silerio, 272 SCRA 280 (1997). 20 Heirs of Joaquin Asuncion v. Commission on Audit, 304 SCRA 322 (1999). 554

554

SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual. It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is needed to establish the applicants rights or interests in the subject matter of the main action.21 It is not required that the applicant should conclusively show that there was a violation of his rights as this issue will still be fully litigated in the main case.22 Thus, an applicant for a writ is required only to show that he has an ostensible right to the final relief prayed for in his complaint.23 In the case at bar, we find that respondent judge had sufficient basis to issue the writ of preliminary injunction. It was established, prima facie, that Legaspi has a right to peaceful possession of his land, pendente lite. Legaspi had title to the subject land. It was likewise established that the diggings were conducted by petitioners in the enclosed area of Legaspis land. Whether the land fenced by Gutierrez and claimed to be included in the land of Legaspi covered an area beyond that which is included in the title of Legaspi is a factual issue still subject to litigation and proof by the parties in the main case for damages. It was necessary for the trial court to issue the writ of preliminary injunction during the pendency of the main case in order to preserve the rights and interests of private respondents Legaspi and Gutierrez. On the third issue, petitioners charge that the respondent judge lacked the neutrality of an impartial judge. They fault the respondent judge for not giving credence to the testimony of their surveyor that the diggings were conducted outside the _______________

21 Buayan Cattle Co., Inc. v. Quintillan, 128 SCRA 276 (1984). 22 Developers Group of Companies, Inc. v. Court of Appeals, 219 SCRA 715 (1993). 23 Saulog v. Court of Appeals, 262 SCRA 51 (1996).

555

VOL. 466, AUGUST 11, 2005 555 Republic vs. Evangelista land of Legaspi. They also claim that respondent judges rulings on objections raised by the parties were biased against them. We have carefully examined the records and we find no sufficient basis to hold that respondent judge should have recused himself from hearing the case. There is no discernible pattern of bias on the rulings of the respondent judge. Bias and partiality can never be presumed. Bare allegations of partiality will not suffice in an absence of a clear showing that will overcome the presumption that the judge dispensed justice without fear or favor.24 It bears to stress again that a judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or the correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the part of respondent judge, is not sufficient to show bias or partiality. As we held in the case of Webb vs. People,25 the adverse and erroneous rulings of a judge on the various motions of a party do not sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that the bias and prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as based on the evidence adduced, do not prove bias or prejudice. We also emphasized that repeated rulings against a litigant, no matter how erroneously, vigorously and consistently expressed, do not amount to bias and prejudice which can be a bases for the disqualification of a judge. Finally, the inhibition of respondent judge in hearing the case for damages has become moot and academic in view of the latters death during the pendency of the case. The main _______________

24 Spouses Causin v. Judge Demecillo, A.M. No. RTJ-04-1860, September 8, 2004, 437 SCRA 594. 25 276 SCRA 243 (1997). 556

556 SUPREME COURT REPORTS ANNOTATED Republic vs. Evangelista case for damages shall now be heard and tried before another judge. IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated March 23 and April 4, 2000, are AFFIRMED. The presiding judge of the Regional Trial Court of Quezon City to whom Civil Case No. Q-0040115 was assigned is directed to proceed with dispatch in hearing the main case for damages. No pronouncement as to costs. SO ORDERED. Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur. Impugned orders of trial court affirmed. Notes.It is common practice for the buyer to inform the seller who referred him. Agents working on commission basis will not normally pass up a commission by not informing their principal of a referred buyer. (People vs. Castillo, 333 SCRA 506 [2000]) The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration in an agency coupled with interest which bars the removal or dismissal of the agent as attorney-in-fact on the ground of alleged loss of trust and confidence. (Bacaling vs. Muya, 380 SCRA 714 [2002]) o0o

[Republic vs. Evangelista, 466 SCRA 544(2005)] 624

SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Watchman Agency Incorporated G.R. No. 136114. January 22, 2004.* LAND BANK OF THE PHILIPPINES, petitioner, vs. CONTINENTAL WATCHMAN AGENCY INCORPORATED AND THE COURT OF APPEALS, respondents. Actions; Pleadings and Practice; Preliminary Injunction; No grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses.There is no grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses. Hence, when contending parties were both given ample time and opportunity to present their respective evidence and arguments in support of their opposing contentions, no grave abuse of discretion can be attributed to the trial court which issued the writ of preliminary injunction, as it is given a generous latitude in this regard, pursuant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended. Same; Same; Same; Certiorari; Appeals; Certiorari cannot be used as a substitute for a lost appeal.Time and again we have reminded mem_______________

* THIRD DIVISION. 625

VOL. 420, JANUARY 22, 2004 625 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated

bers of the bench and bar that the special civil action of certiorari cannot be used as a substitute for a lost appeal. Same; Same; Same; Same; Court has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45.Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45, especially if filed within the reglementary period for filing a petition for review. Same; Same; Same; The issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court.The rule is well-entrenched that the issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court. It bears reiterating that Section 4 of Rule 58 gives generous latitude to the trial courts in this regard for the reason that conflicting claims in an application for a provisional writ more often than not involve a factual determination which is not the function of the appellate courts. Hence, the exercise of sound judicial discretion by the trial court in injunctive matters must not be interfered with except when there is manifest abuse, which is wanting in the present case. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Miguel M. Gonzales, Norberto L. Martinez and Allan E. Benusa for petitioner. Juanito P. Noel for respondent. SANDOVAL-GUTIERREZ, J.:

We have consistently held that there is no grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses.1 Hence, when contending parties were both given ample time and opportunity to present their respective evidence and arguments in support of their opposing contentions, no grave abuse of discretion can be

attributed to the trial court which issued the writ of preliminary injunction, as it is given a generous latitude in this regard, pursu_______________

1 Santos vs. Court of Appeals, G.R. No. 61218, September 23, 1992, 214 SCRA 162. 626

626 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated ant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended. Assailed in this petition for certiorari under Rule 65 of the same Rules is the Decision2 dated July 31, 1998 of the Court of Appeals in CA-G.R. SP No. 46890, entitled Land Bank of the Philippines versus Judge Vivencio S. Badig and Continental Watchman Agency Incorporated the dispositive portion of which reads: WHEREFORE, premises considered, the petition is hereby denied due course and the same DISMISSED. Let the original record of the case be remanded to the court a quo immediately upon the finality hereof. SO ORDERED.3 On September 28, 1996, Land Bank of the Philippines (LBP), herein petitioner, caused to be published in the Philippine Daily Inquirer, a newspaper of general circulation, an Invitation to Pre-Qualify, inviting reputable security agencies to pre-qualify for security guard services in the different LBP offices, properties and installations nationwide. Continental Watchmen Agency Incorporated (CWAI), herein private respondent, and other security agencies responded to the invitation and participated in the public bidding.

In the bidding proper held on June 10, 1997, all the pre-qualified security agencies, private respondent included, submitted their individual sealed bid proposals to petitioners Special Committee for the Selection of Security Agencies (Bid Committee). Private respondent submitted a bid for three (3) areas, namely, Area I, Area III, and Area V, all in Luzon. After all the bids were opened and evaluated, it turned out that private respondent was the lowest bidder for those three areas. However, on June 18, 1997, the Bid Committee declared private respondent disqualified because (1) its bid price was below the monthly salary of a guard prescribed by the Philippine Association of Detective and Protective Agency Operators, Inc.; and (2) it vio_______________

2 Penned by Associate Justice Ramon Mabutas, Jr. (retired) and concurred in by then Associate Justices Arturo B. Buena (retired Associate Justice of the Supreme Court) and Hilarion L. Aquino, (retired), Rollo at pp. 26-37. 3 Rollo at p. 37. 627

VOL. 420, JANUARY 22, 2004 627 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated lated petitioners Bid Bulletin No. 1 requiring that the bid price should include night differential pay for all the guards. Private respondent asked for reconsideration but was denied by the Bid Committee. Hence, on July 22, 1997, private respondent filed with the Regional Trial Court, Branch 17, Manila, a petition for injunction and damages with a prayer

for a preliminary mandatory injunction against petitioner LBP, docketed as Civil Case No. 97-84264. On August 1, 1997, after the hearing wherein both parties presented their respective evidence, the trial court issued a temporary restraining order (TRO) effective for twenty (20) days. At the same time, the trial court set for hearing private respondents application for preliminary injunction. This incident was heard on August 22, 1997. Thereafter, the trial court issued an Order directing the issuance of a writ of preliminary injunction, thus: WHEREFORE, the petition for the issuance of a writ of preliminary injunction is hereby granted. Upon the filing of a bond in the sum of Fifty Thousand Pesos (P50,000.00), Philippine currency, and the approval thereof by the Court, let a writ issue directing the defendant, its attorneys, representatives and other persons assisting it, to cease and desist from awarding the contract for security agencies for Area I, Area III and Area V in Luzon to any security agency, until further orders from the Court. SO ORDERED.4 Meanwhile, on August 27, 1997, petitioner filed its Answer with Special and/or Affirmative Defenses and Compulsory Counterclaim.5 On September 2, 1997, a writ of preliminary injunction6 was accordingly issued. On January 12, 1998, the trial court issued an Order denying petitioners motion for reconsideration of its Order directing the issuance of a writ of preliminary injunction. Consequently, on February 23, 1998, petitioner filed with respondent Court of Appeals a Petition for Certiorari and Prohibition with Preliminary Injunction and Temporary Restraining Or_______________

4 Id., at p. 60 5 Id., at pp. 62-70. 6 Id., at p. 118. 628

628 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated der under Rules 58 and 65 of the 1997 Rules of Civil Procedure, as amended, alleging that the two Orders of the trial court dated August 22, 1997 and January 12, 1998 were issued without jurisdiction or with grave abuse of discretion.7 On July 31, 1999, the Court of Appeals issued its assailed Decision dismissing the petition, thus: WHEREFORE, premises considered, the petition is hereby denied due course and the same DISMISSED. Let the original record of the case be remanded to the court a quo immediately upon the finality hereof. SO ORDERED.8 The Court of Appeals ratiocinated as follows: After a fine filtration of the record (expediente) and a close look at the two assailed orders, We agree with the private respondent that the respondent court did not commit any grave abuse of discretion in issuing them. At this juncture, it is well to state that the special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment (Ramnani vs. Court of Appeals, 221 SCRA 582). It will not even issue for simple abuse of discretion (University of the Philippines vs. Civil Service Commission, 228 SCRA 207). Parenthetically, grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Planters Products, Inc. vs. Court of Appeals, 193 SCRA 563), or in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostilityand it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law (Bustamante vs. Commission on Audit, 216 SCRA 134; Philippine Airlines, Inc. vs. Confesor, 231 SCRA 41). In the case at bench, the record does not show such kind of actuation on the part of the respondent judge. As long as a court or quasi-

judicial body acts within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari (New York Marine Managers, Inc. vs. Court of Appeal, 249 SCRA 416; Commissioner on Internal Revenue vs. Court of Appeals, 257 SCRA 200). Furthermore, this being a petition for certiorari, factual matters are not proper for consideration (Insular Bank of Asia and America vs. Court of Appeals, 228 SCRA 420; Navarro vs. Commission on Elections, 228 SCRA 596), for this Court has to confine itself to the issue of whether of _______________

7 Id., at pp. 79-94. 8 Id., at p. 37. 629

VOL. 420, JANUARY 22, 2004 629 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated not the respondent court lacked or exceeded its jurisdiction or committed grave abuse of discretion (San Pedro vs. Court of Appeals, 253 SCRA 145)it cannot review conclusion of fact (Holy Cross of Davao College, Inc. vs. Joaquin, 263 SCRA 358). Anyway, it should be stated that the grant or denial of an injunction rests on the sound discretion of the trial court (Technology Developers, Inc. vs. Court of Appeals, 193 SCRA 147; Avila vs. Tapucar, 201 SCRA 148)and the same will not be interfered with by appellate courts except on a clear abuse of discretion (S & A Gaisano Incorporated vs. Hidalgo, 19 SCRA 224), which situation appeared wanting in the case at bench. We took note that the respondent court conducted hearings before issuing a writ of preliminary injunction. More. The private respondent was even required to put a bond to answer for possible damages which may arise from the issuance of said writ of preliminary injunction. On this score, We wish to advert to

Supreme Court rulings that erroneous conclusions or errors of judgment or of procedure, not relating to the courts jurisdiction or involving grave abuse of discretion, are not reviewable by certiorari under Rule 65 of the Rules of Court (Rodriguez vs. Court of Appeals, 245 SCRA 150, Commissioner on Internal Revenue vs. Court of Appeals, supra; Santiago Land Development Company vs. Court of Appeals, 258 SCRA 535). For, as already stated, such errors are reviewable by timely appeal. Similarly, the special civil action of prohibition must be based on jurisdictional grounds against the trial courts judgment (Vda. de Suan vs. Unson, 185 SCRA 437). It is designed to prevent the use of the strong arm of the law in an oppressive or vindictive manner (Planas vs. Gil, 67 SCRA 62; Lopez vs. City Judge, 18 SCRA 616). To justify its issuance, there are certain requisites which must be complied with (Guingona vs. City Fiscal of Manila, 137 SCRA 597), which requisites the petitioner failed to comply. Also, said recourse is available only when there is no appeal or any plain, speedy or adequate remedy in the ordinary course of law (Pilar Development Corporation vs. Court of Appeals, 225 SCRA 549). Undeniably, appeal will be available in the case at bench.9 Petitioner filed a motion for reconsideration but was denied by the Appellate Court in its Resolution dated September 22, 1998. Hence, the present petition for certiorari alleging: IT IS MOST RESPECTFULLY SUBMITTED THAT THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT PROMULGATED AND ISSUED THE DECISION DATED JULY 31, 1998 AND RESOLUTION DATED SEPTEMBER 22, 1998 UPHOLDING THE QUESTIONED ORDERS OF THE RESPONDENT COURT IN CIVIL _______________

9 Id., at pp. 35-37. 630

630 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Continental Watchman Agency Incorporated CASE NO. 97-84264 DATED AUGUST 22, 1997 AND JANUARY 12, 1998.10 Petitioner submits inter alia that the Court of Appeals, by dismissing its petition, in effect compelled it to enter into a contract for security guard services with private respondent and as a result, Civil Case No. 97-84264 has been prematurely resolved. Private respondent, on the other hand, counters that respondent Court of Appeals did not act with grave abuse of discretion in affirming the Order of the trial court directing the issuance of the writ of preliminary injunction. In the first place, the Order was issued after a hearing wherein the parties were given the opportunity to present their respective evidence. Secondly, private respondent, being the lowest bidder, has a clear right to an injunction. Lastly, whatever error the trial court may have committed is only an error of judgment, not correctible by certiorari. The petition must fail. First, petitioners remedy is an appeal to this Court from the Court of Appeals Decision dated July 31, 1998 by way of a petition for review on certiorari under Rule 45. Instead, it filed this petition for certiorari under Rule 65 only on November 18, 1998 or forty three (43) days after it received the Appellate Courts Decision denying its motion for reconsideration. Apparently, petitioner resorted to certiorari because it failed to interpose an appeal seasonably. This, of course, is a procedural flaw. Time and again we have reminded members of the bench and bar that the special civil action of certiorari cannot be used as a substitute for a lost appeal.11 Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45, especially if filed within the reglementary period for filing a petition for review.12 In this case, however, we find no reason to justify a liberal application of the Rules. _______________

10 Id., at p. 10.

11 Bernardo vs. Court of Appeals, G.R. No. 106153, July 14, 1997, 275 SCRA 413. 12 Delsan Transport Lines, Inc. vs. Court of Appeals, G.R. No. 112288, February 20, 1997, 268 SCRA 597. 631

VOL. 420, JANUARY 22, 2004 631 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated Even assuming that the present petition is a proper remedy, still it is dismissible. Based on the evidence presented by private respondent, the trial court found that all the requisites for the issuance of an injunctive writ were present.13 Although petitioner _______________

13 Sections 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended in relation to Section 3 of the same rule: SEC. 4. Verified application and bond for preliminary injunction or temporary restraining order.A preliminary injunction or temporary restraining order may be granted only when: (a) The application in the action or proceeding is verified, and shows facts entitling the applicant to the relief demanded; and (b) Unless exempted by the court, the applicant files with the court where the action of proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay to such party or persons all damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued. (4a)

(c) When an application for a writ of preliminary injunction or a temporary restraining order is included in a complaint or any initiatory pleading, the case, if filed in a multiple sala court, shall be raffled only after notice to and in the presence of the adverse party or the person to be enjoined. In any event, such notice shall be preceded, or contemporaneously accompanied, by service for summons, together with a copy of the complaint or initiatory pleading and the applicants affidavit and bond, upon the adverse party in the Philippines. However, where the summons could not be served personally or by substituted service despite diligent efforts, or the adverse party is a resident of the Philippines temporarily absent therefrom or is a nonresident thereof, the requirement of prior or contemporaneous service of summons shall not apply. (d) The application for a temporary restraining order shall thereafter be acted upon only after all parties are board in a summary hearing which shall be conducted within twenty-four (24) hours after the sheriffs return of service and/or the records are received by the branch selected by raffle and to which the records shall be transmitted immediately. SEC. 3. Grounds for issuance of preliminary injunction.A preliminary injunction may be granted when it is established: 632

632 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated presented evidence to rebut private respondents assertions, those will be better assessed and considered in the trial proper. The assailed injunctive writ is not a judgment on the merits of the case, contrary to the submission of petitioner, for a writ of preliminary injunction is generally based solely on initial and incomplete evidence. The evidence submitted during the hearing of the incident is not conclusive or complete for only a sampling is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision of the case on the merits.14 As such, the findings of fact and opinion of a court when issuing the writ of preliminary injunction are interlocutory in

nature and made before the trial on the merits is commenced or terminated. Furthermore, it does not necessarily proceed that when a writ of preliminary injunction is issued, a final injunction will follow, as erroneously argued by petitioner. There are vital facts that have yet to be presented during the trial which may not be obtained or presented during the hearing on the application for the injunctive writ.15 Clearly, petitioners contention that the trial court and the Court of Appeals had already disposed of the main case lacks merit. Also, the sole object of a preliminary injunction is to preserve the status quo until the merits of the case can be heard.16 Here, _______________

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That the party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding and lending to render the judgment ineffectual. (3a) 14 Urbanes, Jr. vs. Court of Appeals, G.R. No. 117964, March 28, 2001, 355 SCRA 537, citing Olalia vs. Hizon, 196 SCRA 665 (1991). 15 Id., citing La Vista Association, Inc. vs. Court of Appeals, 278 SCRA 498 (1997) and Sto. Tomas University Hospital vs. Surla, 294 SCRA 382 (1998). 16 Id., citing Manila Banking Corporation vs. Court of Appeals, 187 SCRA 138 (1990). 633

VOL. 420, JANUARY 22, 2004 633

Land Bank of the Philippines vs. Continental Watchman Agency Incorporated after evaluating the evidence presented by both contending parties, the trial court held that justice would be better served if the status quo is preserved until the final determination of the merits of the case. We find nothing whimsical, arbitrary, or capricious in such ruling. Significantly, the rule is well-entrenched that the issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court. It bears reiterating that Section 4 of Rule 58 gives generous latitude to the trial courts in this regard for the reason that conflicting claims in an application for a provisional writ more often than not involve a factual determination which is not the function of the appellate courts. Hence, the exercise of sound judicial discretion by the trial court in injunctive matters must not be interfered with except when there is manifest abuse,17 which is wanting in the present case. In sum, we find the petition bereft of merit. It is not the proper remedy and even if it is, no grave abuse of discretion was committed by respondent Court of Appeals. WHEREFORE, the petition is DISMISSED. SO ORDERED. Vitug (Chairman), Corona and Carpio-Morales, JJ., concur. Petition dismissed. Note.The erroneous filing of a petition for certiorari with the Court of Appeals does not toll the running of the sixty (60)-day period. (Kuizon vs. Desierto, 354 SCRA 158 [2001]) o0o

_______________

17 Id., citing Saulog vs. Court of Appeals, 262 SCRA 51 (1996); Searth Commodities Corp. vs. Court of Appeals, 207 SCRA 622 (1992); S & A Gaisano, Inc. vs. Judge Hidalgo, 192 SCRA 224 (1990).

[Land Bank of the Philippines vs. Continental Watchman Agency Incorporated, 420 SCRA 624(2004)] 624 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated G.R. No. 136114. January 22, 2004.* LAND BANK OF THE PHILIPPINES, petitioner, vs. CONTINENTAL WATCHMAN AGENCY INCORPORATED AND THE COURT OF APPEALS, respondents. Actions; Pleadings and Practice; Preliminary Injunction; No grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses.There is no grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses. Hence, when contending parties were both given ample time and opportunity to present their respective evidence and arguments in support of their opposing contentions, no grave abuse of discretion can be attributed to the trial court which issued the writ of preliminary injunction, as it is given a generous latitude in this regard, pursuant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended. Same; Same; Same; Certiorari; Appeals; Certiorari cannot be used as a substitute for a lost appeal.Time and again we have reminded mem_______________

* THIRD DIVISION. 625

VOL. 420, JANUARY 22, 2004 625

Land Bank of the Philippines vs. Continental Watchman Agency Incorporated bers of the bench and bar that the special civil action of certiorari cannot be used as a substitute for a lost appeal. Same; Same; Same; Same; Court has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45.Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45, especially if filed within the reglementary period for filing a petition for review. Same; Same; Same; The issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court.The rule is well-entrenched that the issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court. It bears reiterating that Section 4 of Rule 58 gives generous latitude to the trial courts in this regard for the reason that conflicting claims in an application for a provisional writ more often than not involve a factual determination which is not the function of the appellate courts. Hence, the exercise of sound judicial discretion by the trial court in injunctive matters must not be interfered with except when there is manifest abuse, which is wanting in the present case. SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Miguel M. Gonzales, Norberto L. Martinez and Allan E. Benusa for petitioner. Juanito P. Noel for respondent. SANDOVAL-GUTIERREZ, J.:

We have consistently held that there is no grave abuse of discretion in the issuance of a writ of preliminary injunction where a party was not deprived of its day in court, as it was heard and had exhaustively presented all its arguments and defenses.1 Hence, when contending parties were both given

ample time and opportunity to present their respective evidence and arguments in support of their opposing contentions, no grave abuse of discretion can be attributed to the trial court which issued the writ of preliminary injunction, as it is given a generous latitude in this regard, pursu_______________

1 Santos vs. Court of Appeals, G.R. No. 61218, September 23, 1992, 214 SCRA 162. 626

626 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated ant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended. Assailed in this petition for certiorari under Rule 65 of the same Rules is the Decision2 dated July 31, 1998 of the Court of Appeals in CA-G.R. SP No. 46890, entitled Land Bank of the Philippines versus Judge Vivencio S. Badig and Continental Watchman Agency Incorporated the dispositive portion of which reads: WHEREFORE, premises considered, the petition is hereby denied due course and the same DISMISSED. Let the original record of the case be remanded to the court a quo immediately upon the finality hereof. SO ORDERED.3 On September 28, 1996, Land Bank of the Philippines (LBP), herein petitioner, caused to be published in the Philippine Daily Inquirer, a newspaper of general circulation, an Invitation to Pre-Qualify, inviting reputable security agencies to pre-qualify for security guard services in the different LBP offices, properties and installations nationwide. Continental Watchmen Agency Incorporated (CWAI), herein private respondent, and other security agencies responded to the invitation and participated in the public bidding.

In the bidding proper held on June 10, 1997, all the pre-qualified security agencies, private respondent included, submitted their individual sealed bid proposals to petitioners Special Committee for the Selection of Security Agencies (Bid Committee). Private respondent submitted a bid for three (3) areas, namely, Area I, Area III, and Area V, all in Luzon. After all the bids were opened and evaluated, it turned out that private respondent was the lowest bidder for those three areas. However, on June 18, 1997, the Bid Committee declared private respondent disqualified because (1) its bid price was below the monthly salary of a guard prescribed by the Philippine Association of Detective and Protective Agency Operators, Inc.; and (2) it vio_______________

2 Penned by Associate Justice Ramon Mabutas, Jr. (retired) and concurred in by then Associate Justices Arturo B. Buena (retired Associate Justice of the Supreme Court) and Hilarion L. Aquino, (retired), Rollo at pp. 26-37. 3 Rollo at p. 37. 627

VOL. 420, JANUARY 22, 2004 627 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated lated petitioners Bid Bulletin No. 1 requiring that the bid price should include night differential pay for all the guards. Private respondent asked for reconsideration but was denied by the Bid Committee. Hence, on July 22, 1997, private respondent filed with the Regional Trial Court, Branch 17, Manila, a petition for injunction and damages with a prayer

for a preliminary mandatory injunction against petitioner LBP, docketed as Civil Case No. 97-84264. On August 1, 1997, after the hearing wherein both parties presented their respective evidence, the trial court issued a temporary restraining order (TRO) effective for twenty (20) days. At the same time, the trial court set for hearing private respondents application for preliminary injunction. This incident was heard on August 22, 1997. Thereafter, the trial court issued an Order directing the issuance of a writ of preliminary injunction, thus: WHEREFORE, the petition for the issuance of a writ of preliminary injunction is hereby granted. Upon the filing of a bond in the sum of Fifty Thousand Pesos (P50,000.00), Philippine currency, and the approval thereof by the Court, let a writ issue directing the defendant, its attorneys, representatives and other persons assisting it, to cease and desist from awarding the contract for security agencies for Area I, Area III and Area V in Luzon to any security agency, until further orders from the Court. SO ORDERED.4 Meanwhile, on August 27, 1997, petitioner filed its Answer with Special and/or Affirmative Defenses and Compulsory Counterclaim.5 On September 2, 1997, a writ of preliminary injunction6 was accordingly issued. On January 12, 1998, the trial court issued an Order denying petitioners motion for reconsideration of its Order directing the issuance of a writ of preliminary injunction. Consequently, on February 23, 1998, petitioner filed with respondent Court of Appeals a Petition for Certiorari and Prohibition with Preliminary Injunction and Temporary Restraining Or_______________

4 Id., at p. 60 5 Id., at pp. 62-70. 6 Id., at p. 118. 628

628 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated der under Rules 58 and 65 of the 1997 Rules of Civil Procedure, as amended, alleging that the two Orders of the trial court dated August 22, 1997 and January 12, 1998 were issued without jurisdiction or with grave abuse of discretion.7 On July 31, 1999, the Court of Appeals issued its assailed Decision dismissing the petition, thus: WHEREFORE, premises considered, the petition is hereby denied due course and the same DISMISSED. Let the original record of the case be remanded to the court a quo immediately upon the finality hereof. SO ORDERED.8 The Court of Appeals ratiocinated as follows: After a fine filtration of the record (expediente) and a close look at the two assailed orders, We agree with the private respondent that the respondent court did not commit any grave abuse of discretion in issuing them. At this juncture, it is well to state that the special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment (Ramnani vs. Court of Appeals, 221 SCRA 582). It will not even issue for simple abuse of discretion (University of the Philippines vs. Civil Service Commission, 228 SCRA 207). Parenthetically, grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Planters Products, Inc. vs. Court of Appeals, 193 SCRA 563), or in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostilityand it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law (Bustamante vs. Commission on Audit, 216 SCRA 134; Philippine Airlines, Inc. vs. Confesor, 231 SCRA 41). In the case at bench, the record does not show such kind of actuation on the part of the respondent judge. As long as a court or quasi-

judicial body acts within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari (New York Marine Managers, Inc. vs. Court of Appeal, 249 SCRA 416; Commissioner on Internal Revenue vs. Court of Appeals, 257 SCRA 200). Furthermore, this being a petition for certiorari, factual matters are not proper for consideration (Insular Bank of Asia and America vs. Court of Appeals, 228 SCRA 420; Navarro vs. Commission on Elections, 228 SCRA 596), for this Court has to confine itself to the issue of whether of _______________

7 Id., at pp. 79-94. 8 Id., at p. 37. 629

VOL. 420, JANUARY 22, 2004 629 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated not the respondent court lacked or exceeded its jurisdiction or committed grave abuse of discretion (San Pedro vs. Court of Appeals, 253 SCRA 145)it cannot review conclusion of fact (Holy Cross of Davao College, Inc. vs. Joaquin, 263 SCRA 358). Anyway, it should be stated that the grant or denial of an injunction rests on the sound discretion of the trial court (Technology Developers, Inc. vs. Court of Appeals, 193 SCRA 147; Avila vs. Tapucar, 201 SCRA 148)and the same will not be interfered with by appellate courts except on a clear abuse of discretion (S & A Gaisano Incorporated vs. Hidalgo, 19 SCRA 224), which situation appeared wanting in the case at bench. We took note that the respondent court conducted hearings before issuing a writ of preliminary injunction. More. The private respondent was even required to put a bond to answer for possible damages which may arise from the issuance of said writ of preliminary injunction. On this score, We wish to advert to

Supreme Court rulings that erroneous conclusions or errors of judgment or of procedure, not relating to the courts jurisdiction or involving grave abuse of discretion, are not reviewable by certiorari under Rule 65 of the Rules of Court (Rodriguez vs. Court of Appeals, 245 SCRA 150, Commissioner on Internal Revenue vs. Court of Appeals, supra; Santiago Land Development Company vs. Court of Appeals, 258 SCRA 535). For, as already stated, such errors are reviewable by timely appeal. Similarly, the special civil action of prohibition must be based on jurisdictional grounds against the trial courts judgment (Vda. de Suan vs. Unson, 185 SCRA 437). It is designed to prevent the use of the strong arm of the law in an oppressive or vindictive manner (Planas vs. Gil, 67 SCRA 62; Lopez vs. City Judge, 18 SCRA 616). To justify its issuance, there are certain requisites which must be complied with (Guingona vs. City Fiscal of Manila, 137 SCRA 597), which requisites the petitioner failed to comply. Also, said recourse is available only when there is no appeal or any plain, speedy or adequate remedy in the ordinary course of law (Pilar Development Corporation vs. Court of Appeals, 225 SCRA 549). Undeniably, appeal will be available in the case at bench.9 Petitioner filed a motion for reconsideration but was denied by the Appellate Court in its Resolution dated September 22, 1998. Hence, the present petition for certiorari alleging: IT IS MOST RESPECTFULLY SUBMITTED THAT THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT PROMULGATED AND ISSUED THE DECISION DATED JULY 31, 1998 AND RESOLUTION DATED SEPTEMBER 22, 1998 UPHOLDING THE QUESTIONED ORDERS OF THE RESPONDENT COURT IN CIVIL _______________

9 Id., at pp. 35-37. 630

630 SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Continental Watchman Agency Incorporated CASE NO. 97-84264 DATED AUGUST 22, 1997 AND JANUARY 12, 1998.10 Petitioner submits inter alia that the Court of Appeals, by dismissing its petition, in effect compelled it to enter into a contract for security guard services with private respondent and as a result, Civil Case No. 97-84264 has been prematurely resolved. Private respondent, on the other hand, counters that respondent Court of Appeals did not act with grave abuse of discretion in affirming the Order of the trial court directing the issuance of the writ of preliminary injunction. In the first place, the Order was issued after a hearing wherein the parties were given the opportunity to present their respective evidence. Secondly, private respondent, being the lowest bidder, has a clear right to an injunction. Lastly, whatever error the trial court may have committed is only an error of judgment, not correctible by certiorari. The petition must fail. First, petitioners remedy is an appeal to this Court from the Court of Appeals Decision dated July 31, 1998 by way of a petition for review on certiorari under Rule 45. Instead, it filed this petition for certiorari under Rule 65 only on November 18, 1998 or forty three (43) days after it received the Appellate Courts Decision denying its motion for reconsideration. Apparently, petitioner resorted to certiorari because it failed to interpose an appeal seasonably. This, of course, is a procedural flaw. Time and again we have reminded members of the bench and bar that the special civil action of certiorari cannot be used as a substitute for a lost appeal.11 Admittedly, this Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the discretion to treat a petition for certiorari as a petition for review on certiorari under Rule 45, especially if filed within the reglementary period for filing a petition for review.12 In this case, however, we find no reason to justify a liberal application of the Rules. _______________

10 Id., at p. 10.

11 Bernardo vs. Court of Appeals, G.R. No. 106153, July 14, 1997, 275 SCRA 413. 12 Delsan Transport Lines, Inc. vs. Court of Appeals, G.R. No. 112288, February 20, 1997, 268 SCRA 597. 631

VOL. 420, JANUARY 22, 2004 631 Land Bank of the Philippines vs. Continental Watchman Agency Incorporated Even assuming that the present petition is a proper remedy, still it is dismissible. Based on the evidence presented by private respondent, the trial court found that all the requisites for the issuance of an injunctive writ were present.13 Although petitioner _______________

13 Sections 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended in relation to Section 3 of the same rule: SEC. 4. Verified application and bond for preliminary injunction or temporary restraining order.A preliminary injunction or temporary restraining order may be granted only when: (a) The application in the action or proceeding is verified, and shows facts entitling the applicant to the relief demanded; and (b) Unless exempted by the court, the applicant files with the court where the action of proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed by the court, to the effect that the applicant will pay to such party or persons all damages which he may sustain by reason of the injunction or temporary restraining order if the court should finally decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of preliminary injunction shall be issued. (4a)

(c) When an application for a writ of preliminary injunction or a temporary restraining order is included in a complaint or any initiatory pleading, the case, if filed in a multiple sala court, shall be raffled only after notice to and in the presence of the adverse party or the person to be enjoined. In any event, such notice shall be preceded, or contemporaneously accompanied, by service for summons, together with a copy of the complaint or initiatory pleading and the applicants affidavit and bond, upon the adverse party in the Philippines. However, where the summons could not be served personally or by substituted service despite diligent efforts, or the adverse party is a resident of the Philippines temporarily absent therefrom or is a nonresident thereof, the requirement of prior or contemporaneous service of summons shall not apply. (d) The application for a temporary restraining order shall thereafter be acted upon only after all parties are board in a summary hearing which shall be conducted within twenty-four (24) hours after the sheriffs return of service and/or the records are received by the branch selected by raffle and to which the records shall be transmitted immediately. SEC. 3. Grounds for issuance of preliminary injunction.A preliminary injunction may be granted when it is established: 632

632 SUPREME COURT REPORTS ANNOTATED Land Bank of the Philippines vs. Continental Watchman Agency Incorporated presented evidence to rebut private respondents assertions, those will be better assessed and considered in the trial proper. The assailed injunctive writ is not a judgment on the merits of the case, contrary to the submission of petitioner, for a writ of preliminary injunction is generally based solely on initial and incomplete evidence. The evidence submitted during the hearing of the incident is not conclusive or complete for only a sampling is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision of the case on the merits.14 As such, the findings of fact and opinion of a court when issuing the writ of preliminary injunction are interlocutory in

nature and made before the trial on the merits is commenced or terminated. Furthermore, it does not necessarily proceed that when a writ of preliminary injunction is issued, a final injunction will follow, as erroneously argued by petitioner. There are vital facts that have yet to be presented during the trial which may not be obtained or presented during the hearing on the application for the injunctive writ.15 Clearly, petitioners contention that the trial court and the Court of Appeals had already disposed of the main case lacks merit. Also, the sole object of a preliminary injunction is to preserve the status quo until the merits of the case can be heard.16 Here, _______________

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That the party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding and lending to render the judgment ineffectual. (3a) 14 Urbanes, Jr. vs. Court of Appeals, G.R. No. 117964, March 28, 2001, 355 SCRA 537, citing Olalia vs. Hizon, 196 SCRA 665 (1991). 15 Id., citing La Vista Association, Inc. vs. Court of Appeals, 278 SCRA 498 (1997) and Sto. Tomas University Hospital vs. Surla, 294 SCRA 382 (1998). 16 Id., citing Manila Banking Corporation vs. Court of Appeals, 187 SCRA 138 (1990). 633

VOL. 420, JANUARY 22, 2004 633

Land Bank of the Philippines vs. Continental Watchman Agency Incorporated after evaluating the evidence presented by both contending parties, the trial court held that justice would be better served if the status quo is preserved until the final determination of the merits of the case. We find nothing whimsical, arbitrary, or capricious in such ruling. Significantly, the rule is well-entrenched that the issuance of the writ of preliminary injunction rests upon the sound discretion of the trial court. It bears reiterating that Section 4 of Rule 58 gives generous latitude to the trial courts in this regard for the reason that conflicting claims in an application for a provisional writ more often than not involve a factual determination which is not the function of the appellate courts. Hence, the exercise of sound judicial discretion by the trial court in injunctive matters must not be interfered with except when there is manifest abuse,17 which is wanting in the present case. In sum, we find the petition bereft of merit. It is not the proper remedy and even if it is, no grave abuse of discretion was committed by respondent Court of Appeals. WHEREFORE, the petition is DISMISSED. SO ORDERED. Vitug (Chairman), Corona and Carpio-Morales, JJ., concur. Petition dismissed. Note.The erroneous filing of a petition for certiorari with the Court of Appeals does not toll the running of the sixty (60)-day period. (Kuizon vs. Desierto, 354 SCRA 158 [2001]) o0o

_______________

17 Id., citing Saulog vs. Court of Appeals, 262 SCRA 51 (1996); Searth Commodities Corp. vs. Court of Appeals, 207 SCRA 622 (1992); S & A Gaisano, Inc. vs. Judge Hidalgo, 192 SCRA 224 (1990).

[Land Bank of the Philippines vs. Continental Watchman Agency Incorporated, 420 SCRA 624(2004)] WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated 3 April 2006 and its Resolution dated 10 July 2006 are AFFIRMED. No pronouncement as to costs. SO ORDERED. Quisumbing (Chairperson), Carpio-Morales, Chico-Nazario and Velasco, Jr., JJ., concur. Petition denied, judgment and resolution affirmed. Notes.The rule on estoppel applies to questions of fact, not of law. (Justice Kapunan, dissenting in Estrada vs. Sandiganbayan, 369 SCRA 394 [2001]) When the owners duplicate certificate of title has not been lost but is in fact in the possession of another person, then the reconstituted certificate is void because the court that rendered the decision had no jurisdiction; Transfer certificates of title may be annulled if issued based on void documents. (Rodriguez vs. Lim, 509 SCRA 113 [2006]) o0o

G.R. No. 175145. March 28, 2008.* SPOUSES ALFREDO and SHIRLEY YAP, petitioners, vs. INTERNATIONAL EXCHANGE BANK,1 SHERIFF RENATO C. FLORA and/or OFFICE OF THE CLERK OF COURT, REGIONAL TRIAL COURT, MAKATI CITY, respondents. Actions; Injunctions; Dissolution of Preliminary Injunction; The issuance of a preliminary injunction is different from its dissolutionas long as the party seeking the dissolution of the preliminary _______________

* THIRD DIVISION. 1 Now Union Bank of the Philippines (Rollo, pp. 379-380).

396

396 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank injunction can prove the presence of any of the grounds for its dissolution, same may be dissolved notwithstanding that the Supreme Court previously ruled that its issuance was not tainted with grave abuse of discretion.The question is: Under the circumstances obtaining in this case, may the trial court recall and dissolve the preliminary injunction it issued despite the rulings of the Court of Appeals and by this Court that its issuance was not tainted with grave abuse of discretion? We hold that the trial court may still order the dissolution of the preliminary injunction it previously issued. We do not agree with petitioners argument that the trial court may no longer dissolve the preliminary injunction because this Court previously ruled that its issuance was not tainted with grave abuse of discretion. The issuance of a preliminary injunction is different from its dissolution. Its issuance is governed by Section 3, Rule 58 of the 1997 Rules of Civil Procedure while the grounds for its dissolution are contained in Section 6, Rule 58 of the 1997 Rules of Civil Procedure. As long as the party seeking the dissolution of the preliminary injunction can prove the presence of any of the grounds for its dissolution, same may be dissolved notwithstanding that this Court previously ruled that its issuance was not tainted with grave abuse of discretion. Certiorari; Motions for Reconsideration; The rule is well-settled that the filing of a motion for reconsideration is an indispensable condition to the filing of a special civil action for certiorari.The rule is well settled that the filing of a motion for reconsideration is an indispensable condition to the filing of a special civil action for certiorari. It must be stressed that a petition for certiorari is an extraordinary remedy and should be filed only as a last resort. The filing of a motion for reconsideration is intended to afford the trial court an opportunity to correct any actual error attributed to it by way of re-examination of the legal and factual issues. By their failure to file a motion for reconsideration, they deprived the trial court of the opportunity to rectify any error it committed, if there was any. Same; Same; The invocation of the application of the exceptions to the rule that a motion for reconsideration is indispensable to the filing of a petition for certiorari must be timely madethe application of the exceptions should be raised in their Petition for Certiorari and not when the Petition has already been dismissed.A perusal of petitioners petition for certiorari filed with the

Court of Appeals shows that they filed the same because there was no appeal, or any 397

VOL. 550, MARCH 28, 2008 397 Yap vs. International Exchange Bank plain, speedy and adequate remedy in the course of law except via a petition for certiorari. When same was dismissed by the Court of Appeals for failure to file a motion for reconsideration of the trial courts Order, they argue that while the filing of a motion for reconsideration is a sine qua non before a petition for certiorari is instituted, the same is not entirely without exception like where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction. It was only when the Court of Appeals dismissed their Petition did they argue that exceptions to the general rule should apply. Their invocation of the application of the exceptions was belatedly made. The application of the exceptions should be raised in their Petition for Certiorari and not when their Petition has already been dismissed. They must give their reasons and explain fully why their case falls under any of the exceptions. This, petitioners failed to do. Same; Same; The mere allegation that there is no appeal, or any plain, speedy and adequate remedy is not one of the exceptions to the rule that a motion for reconsideration is a sine qua non before a petition for certiorari may be filed. Petitioners argument that they filed the Petition for Certiorari without filing a motion for reconsideration because there is no appeal, or any plain, speedy and adequate remedy in the course of law except via a Petition for Certiorari does not convince. We have held that the plain and adequate remedy referred to in Section 1, Rule 65 of the Rules of Court is a motion for reconsideration of the assailed Order or Resolution. The mere allegation that there is no appeal, or any plain, speedy and adequate remedy is not one of the exceptions to the rule that a motion for reconsideration is a sine qua non before a petition for certiorari may be filed. PETITION for review on certiorari of the resolutions of the Court of Appeals. The facts are stated in the opinion of the Court. Gregorio D. Caeda, Jr. for petitioners.

Macalino & Associates for respondents. 398

398 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks to set aside the Resolution2 of the Court of Appeals in CA-G.R. SP No. 95074 dated 11 July 2006 which dismissed petitioner-spouses Alfredo and Shirley Yaps petition for certiorari which questioned the Order3 of Branch 264 of the Regional Trial Court (RTC) of Pasig City in Civil Case No. 68088 recalling and dissolving the Writ of Preliminary Injunction dated 13 August 2001, and its Resolution4 dated 9 October 2006 denying petitioners Motion for Reconsideration. The factual antecedents are as follows: Respondent International Exchange Bank (iBank, for brevity) filed a collection suit with application for the issuance of a writ of preliminary attachment against Alberto Looyuko and Jimmy T. Go in the RTC of Makati. The case was raffled to Branch 150 and was docketed as Civil Case No. 98-791. On 7 October 1999, the trial court rendered a Decision in favor of respondent iBank and found Alberto Looyuko and Jimmy T. Go liable, ordering them to pay the amount of ninety-six million pesos (P96,000,000.00), plus penalty. A Writ of Execution on the judgment against Mr. Looyuko was implemented. Thereafter, a Writ of Execution was issued against Mr. Go for his part of the liability. Thereupon, respondent Renato C. Flora, Sheriff of Branch 150 of the RTC of Makati City, issued a Notice of Sheriffs Sale on 12 May 2000 notifying all the parties concerned, as well as the public in general, that the following real properties, among other properties, covered by Transfer Certificates of Title (TCTs) No. PT-66751, No. PT-66749, No. 55469 and No. 45229 of the _______________

2 Penned by Associate Justice (now Presiding Justice) Conrado M. Vasquez, Jr. with Associate Justices Mariano C. del Castillo and Enrico A. Lanzanas, concurring; Rollo, pp. 38-39. 3 Penned by Hon. Leoncio M. Janolo, Jr.; Rollo, pp. 42-49. 4 Rollo, pp. 40-41. 399

VOL. 550, MARCH 28, 2008 399 Yap vs. International Exchange Bank Registry of Deeds of Pasig City, TCT No. 36489 of the Registry of Quezon City, and TCTs No. 4621 and No. 52987 of the Registry of Deeds of Mandaluyong City, allegedly owned by Mr. Go will be sold at public auction on 15 June 2000.5 Said public auction did not push through. On 13 June 2000, petitioner-spouses Alfredo and Shirley Yap filed a Complaint for Injunction with Prayer for Temporary Restraining Order and/or Preliminary Injunction with the RTC of Pasig City. The case was docketed as Civil Case No. 67945 and was raffled to Branch 158 thereof. Petitioners sought to stop the auction sale alleging that the properties covered by TCTs No. PT-66751, No. PT66749, No. 55469 and No. 45229 of the Registry of Deeds of Pasig City, TCT No. 36489 of the Registry of Quezon City, and TCTs No. 4621 and No. 52987 of the Registry of Deeds of Mandaluyong City, are already owned by them by virtue of Deeds of Absolute Sale6 executed by Jimmy Go in their favor. They further alleged that respondent sheriff disregarded their right over the properties despite their execution of an Affidavit of Adverse Claim to prove their claim over the properties and the publication of a Notice to the Public warning that various deeds had already been issued in their favor evidencing their right over the same. A second Notice of Sheriffs Sale dated 30 June 2000 was issued by Sheriff Flora scheduling a public auction on 24 July 2000 for the aforementioned properties. The public auction did not happen anew. Thereafter, a third Notice of Sheriffs _______________

5 Id., at pp. 71-73. 6 Deed of Absolute Sale dated 22 September 1999 between Jimmy Go, as vendor, and Shirley Yap, as vendee, over parcels of land covered by TCTs No. 4621 and No. 52987 in consideration of P4.05 million. Deed of Absolute Sale dated 15 October 1997 between Jimmy Go, as vendor, and Alfredo Yap, as vendee, over parcels of land covered by TCTs No. PT66749, No. PT-66751, No. 55469, No. 45229 and No. 36489 in consideration of P3.5 million. 400

400 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank Sale dated 21 July 2000 scheduling a public auction on 22 August 2000 was issued. On 21 August 2000, the RTC of Pasig City, Branch 158, issued an Order in Civil Case No. 67945 denying petitioners application for a writ of preliminary injunction.7 As scheduled, the public auction took place on 22 August 2000 for which respondent sheriff issued a Certificate of Sale stating that the subject properties had been sold at public auction in favor of respondent iBank, subject to the third-party claims of petitioners.8 Petitioners filed with the RTC of Pasig City the instant case for Annulment of Sheriffs Auction Sale Proceedings and Certificate of Sale against iBank, the Clerk of Court and Ex-Officio Sheriff of RTC Makati City, and Sheriff Flora. The case was docketed as Civil Case No. 68088 and was raffled to Branch 264. The Complaint was amended to include a prayer for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction.9 Engracio M. Escarias, Jr., Clerk of Court VII and Ex-Officio Sheriff of RTC Makati City, filed his Answer while respondents iBank and Sheriff Flora filed an Omnibus Motion (Motion to Refer the Complaint to the Office of the Clerk of Court for Raffle in the Presence of Adverse Party and Motion to Dismiss) dated 17 October 2000.10

In an Order dated 20 February 2001, Hon. Leoncio M. Janolo, Jr. denied the Omnibus Motion for lack of merit.11 Respondents iBank and Sheriff Flora filed a Motion for Reconsideration dated 26 February 2001.12 _______________

7 Rollo, pp. 86-90. 8 Id., at pp. 53-54. 9 Id., at pp. 50-65. 10 Id., at pp. 74-85. 11 Id., at pp. 127-218. 12 Id., at pp. 129-139. 401

VOL. 550, MARCH 28, 2008 401 Yap vs. International Exchange Bank A hearing was held on the application for preliminary injunction. On 18 July 2001, an Order was issued by Judge Janolo granting petitioners application for issuance of a writ of preliminary injunction. The Order reads: WHEREFORE, premises considered, plaintiffs application for issuance of a Writ of Preliminary Injunction is GRANTED, and defendants and their representatives are enjoined from proceeding further with the execution, including consolidating title and taking possession thereof, against plaintiffs real properties covered by Transfer Certificates of Title Nos. PT-66751, PT66749, 55469, 45229, 4621, 52987 and 36489. The Writ of Preliminary Injunction shall be issued upon plaintiffs posting of a bond executed to defendant in the amount of Three Million Pesos (P3,000,000.00) to the effect that plaintiffs will pay defendants all damages which the latter may sustain by reason of the injunction if it be ultimately decided that the injunction is unwarranted.13

On 13 August 2001, upon posting a bond in the amount of three million pesos (P3,000,000.00), Judge Janolo issued the Writ of Preliminary Injunction.14 Respondents iBank and Sheriff Flora filed on 29 August 2001 a Motion for Reconsideration15 of the order granting the Writ of Preliminary Injunction which the trial court denied in an Order dated 21 November 2001.16 With the denial of their Motion for Reconsideration, respondents iBank and Sheriff Flora filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with prayer for issuance of Temporary Restraining Order and/or Preliminary Injunction17 praying that it: (a) issue immediately a temporary restraining order enjoining Judge _______________

13 Id., at pp. 143. 14 Id., at p. 144. 15 Id., at pp. 145-158. 16 Id., at p. 159. 17 Id., at pp. 160-214. 402

402 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank Janolo from taking any action or conducting any further proceeding on the case; (b) annul the Orders dated 18 July 2001 and 21 November 2001; and (c) order the immediate dismissal of Civil Case No. 68088. In its decision dated 18 July 2003, the Court of Appeals dismissed the Petition.18 It explained that no grave abuse of discretion was committed by Judge Janolo in promulgating the two Orders. It emphasized that its ruling only pertains to the propriety or impropriety of the issuance of the preliminary injunction and has no bearing on the main issues of the case which are still to

be resolved on the merits. The Very Urgent Motion for Reconsideration filed by respondents iBank and Sheriff Flora was denied for lack of merit.19 Respondents iBank and Sheriff Flora thereafter filed with this Court a Petition for Certiorari which we dismissed. The Courts Resolution dated 7 March 2005 reads: Considering the allegations, issues and arguments adduced in the petition for certiorari, the Court Resolves to DISMISS the petition for being a wrong remedy under the Rules and evidently used as a substitute for the lost remedy of appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended. Besides, even if treated as a petition under Rule 65 of the said Rules, the same would be dismissed for failure to sufficiently show that the questioned judgment is tainted with grave abuse of discretion.20 Accordingly, an Entry of Judgment was issued by the Supreme Court certifying that the resolution dismissing the case had become final and executory on 30 July 2005.21 Subsequently, respondents iBank and Sheriff Flora filed with the RTC of Pasig City, Branch 264, an Omnibus Motion (To Resolve Motion to Dismiss Complaint and/or Dissolve Injunction) dated 31 January 2006 praying that their pending _______________

18 Id., at pp. 215-226. 19 Id., at p. 244. 20 Id., at p. 245. 21 Id., at p. 246. 403

VOL. 550, MARCH 28, 2008 403 Yap vs. International Exchange Bank

Motion for Reconsideration dated 26 February 2001 which seeks for the dismissal of the case be resolved and/or the Writ of Preliminary Injunction previously issued be dissolved.22 On 9 February 2006, petitioners filed their Comment thereon with Motion to Cite in Contempt the counsel23 of respondents. They pray that the pending Motion for Reconsideration be denied for being devoid of merit, and that the Motion to Dissolve Writ of Preliminary Injunction be also denied, it being a clear defiance of the directive of the Supreme Court which ruled with finality that the injunction issued by the trial court was providently issued and was not tainted with grave abuse of discretion. They further ask that respondents counsel be cited in contempt of court and be meted out the appropriate penalty.24 Respondents filed a Reply dated 20 February 2006. In a Manifestation dated 24 March 2006, respondents iBank and Sheriff Flora submitted an Affidavit of Merit to emphasize their resolve and willingness, among other things, to file a counter-bond to cover whatever damages petitioners may suffer should the trial court decide to dissolve the writ of preliminary injunction.25 Petitioners filed a Counter-Manifestation with Second Motion to Cite Respondents Counsel in Direct Contempt of Court26 to which respondents filed an Opposition.27 Petitioners filed a Reply thereto.28 In an Order29 dated 29 April 2006, the trial court recalled and dissolved the Writ of Preliminary Injunction dated 13 August 2001, and ordered respondents to post a counter-bond amounting to ten million pesos. It directed the Branch Clerk _______________

22 Id., at pp. 248-252. 23 Law Firm of Valerio Ong Saavedra Vicerra & Protasio. 24 Rollo, pp. 253-260. 25 Id., at pp. 261-264. 26 Id., at pp. 265-275. 27 Id., at pp. 284-288. 28 Id., at pp. 299-302. 29 Id., at pp. 42-49.

404

404 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank of Court to issue a Writ Dissolving Preliminary Injunction upon the filing and approval of the required counter-bond. The dispositive portion of the Order reads: WHEREFORE, this Courts writ of preliminary injunction dated August 13, 2001 is recalled and dissolved. Defendants are hereby ordered to post a counter-bond amounting to ten million pesos (P10,000,000.00) to cover the damages plaintiffs would incur should a favorable judgment be rendered them after trial on the merits. The Branch Clerk of Court is directed to issue a Writ Dissolving Preliminary Injunction upon the filing and approval of defendants counter-bond.30 The trial court explained its ruling in this wise: In our jurisdiction, the provisions of Rule 58 of the Revised Rules of Court allow the issuance of preliminary injunction. This court granted plaintiffs prayer preliminary injunction in the Order dated July 18, 2001 and the corresponding writ issued on August 13, 2001. Defendants in this case, however, are not without remedy to pray for dissolution of preliminary injunction already granted because it is only interlocutory and not permanent in nature. The provisions of Section 6, Rule 58 of the Revised Rules of Court allow dissolution of the injunction granted provided there is affidavit of party or persons enjoined; an opportunity to oppose by the other party; hearing on the issue, and filing of a bond to be fixed by the court sufficient to compensate damages applicant may suffer by dissolution thereby. A preliminary injunction is merely a provisional remedy, an adjunct to the main case subject to the latters outcome. Its sole objective is to preserve the status quo until the trial court hears fully the merits of the case. The status quo is the last actual, peaceable and uncontested situation which precedes a controversy. The status quo should be that existing at the time of the filing of the case. A preliminary injunction should not establish new relations between

_______________

30 Id., at p. 49. 405

VOL. 550, MARCH 28, 2008 405 Yap vs. International Exchange Bank the parties, but merely maintain or re-establish the pre-existing relationship between them. x x x. When the complainants right or title is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of injunctive relief is not proper and constitutes grave abuse of discretion. x x x. In the case at bar, plaintiffs deed of sale was purported to be not duly notarized. As such, the legal right of what the plaintiffs claim is still doubtful and such legal right can only be threshed out in a full blown trial where they can clearly establish the right over the disputed properties. Moreover, defendants are willing to post a counter bond which could cover up to the damages in favor of plaintiffs in case the judgment turns out to be adverse to them. Under the Rules of Civil Procedure, this is perfectly allowed and the dissolution of the writ of injunction can accordingly be issued. In the case of Lasala vs. Fernandez, the highest court has enunciated that a court has the power to recall or modify a writ of preliminary injunction previously issued by it. The issuance or recall of a preliminary writ of injunction is an interlocutory matter that remains at all times within the control of the court. (G.R. No. L-16628, May 23, 1962). The defendants had shown that dissolution of the writ of injunction is just and proper. It was duly shown that great and irreparable injury would severely cause the defendants if the writ of injunction shall continue to exist.31 On 5 May 2006, petitioners filed a Petition for Certiorari before the Court of Appeals asking that the trial courts Order dated 29 April 2006 be set aside.32 During the pendency of the Petition for Certiorari, petitioners filed before the trial court a Very Urgent Motion to Suspend Proceedings33 to which respondents filed a Comment.34

On 11 July 2006, the Court of Appeals resolved to dismiss outright the Petition for Certiorari for failure of petitioners to _______________

31 Id., at pp. 47-49. 32 Id., at pp. 320-342. 33 Id., at pp. 343-346. 34 Id., at pp. 347-351. 406

406 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank file a motion for reconsideration of the Order dated 29 April 2006.35 The Motion for Reconsideration36 filed by petitioners was denied.37 After being granted an extension of thirty days within which to file a petition for certiorari, petitioners filed the instant Petition on 14 December 2006. They made the following assignment of errors: I THE HONORABLE PUBLIC RESPONDENT JUDGE LEONCIO M. JANOLO, JR. GRAVELY ABUSED HIS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION IN DISSOLVING THE WRIT OF PRELIMINARY INJUNCTION DATED 13 AUGUST 2001. 1. DESPITE THE FACT THAT THE COURT OF APPEALS RESOLVED WITH FINALITY THAT YOUR PETITIONERS WILL SUFFER IRREPARABLE INJURY (C.A.s emphasis) IF NO INJUNCTION IS ISSUED. 2. DESPITE THE FACT THAT THE HON. SUPREME COURT RULED WITH FINALITY THAT THE COURT A QUO DID NOT ABUSE ITS JURISDICTION WHEN IT ISSUED THE INJUNCTION DATED 13 AUGUST 2001, THUS,

SUSTAINING THE INJUNCTION. II

REGULARITY

OF

THE

WRIT

OF

PRELIMINARY

THE HONORABLE PUBLIC RESPONDENT JUDGE LEONCIO M. JANOLO, JR. GRAVELY ABUSED HIS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION BY FIXING THE PHP10,000,000.00 COUNTER-BOND DESPITE THE FACT THAT THE IRREPARABLE DAMAGE TO PETITIONERS AS A RESULT OF DISSOLVING THE WRIT OF PRELIMINARY INJUNCTION IS INCAPABLE OF PECUNIARY ESTIMATION OR COULD NOT BE QUANTIFIED. _______________

35 Id., at pp. 38-39. 36 Id., at pp. 352-358. 37 Id., at pp. 40-41. 407

VOL. 550, MARCH 28, 2008 407 Yap vs. International Exchange Bank III THE HONORABLE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN OUTRIGHTLY DISMISSING YOUR PETITIONERS PETITION FOR CERTIORARI IN CA-GR SP NO. 95074, AS IT FAILED TO APPLY EXISTING JURISPRUDENCE TO THE EFFECT THAT A MOTION FOR RECONSIDERATION MAY BE DISPENSED WITH WHERE THE CONTROVERTED ACT IS PATENTLY ILLEGAL OR WAS PERFORMED WITHOUT JURISDICTION OR IN EXCESS OF JURISDICTION AS HELD IN HAMILTON VS. LEVY (344 SCRA 821). IV

THE HONORABLE COURT OF APPEALS LIKEWISE ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN IT DENIED PETITIONERS MOTION FOR RECONSIDERATION CLEARLY POINTING OUT TO THE COURT THAT AS AN EXCEPTION TO THE RULE, THE REQUIRED MOTION FOR RECONSIDERATION MAY BE DISPENSED WITH. At the outset, it must be said that the Writ of Preliminary Injunction dated 13 August 2001 issued by the trial court has not yet been actually dissolved because respondents have not posted the required counter-bond in the amount of P10,000,000.00. The dissolution thereof is primed on the filing of the counter-bond. Petitioners argue that the trial court abused its discretion when it ordered the dissolution of the Writ of Preliminary Injunction, the propriety of its issuance having been affirmed by both the Court of Appeals and the Supreme Court. There being an Order by this Court that the injunction issued by the trial court was not tainted with grave abuse of discretion, the dissolution of said writ is a clear defiance of this Courts directive. Respondents, on the other hand, contend that the trial court has the authority and prerogative to set aside the Writ of Preliminary Injunction. They add that since petitioners Deed of Sale was not duly notarized, the latters application for preliminary injunction is devoid of factual and legal bases. They assert that, not being public documents, the subject 408

408 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank deeds of sale are nothing but spurious, if not falsified, documents. They add that the continuance of the Writ of Preliminary Injunction would cause them irreparable damage because it continues to incur damage not only for the nonpayment of the judgment award (in Civil Case No. 98-791 before the RTC of Makati City, Br. 150), but also for opportunity losses resulting from the continued denial of its right to consolidate title over the levied properties. There is no dispute that both the Court of Appeals and this Court have ruled that the issuance of the Writ of Preliminary Injunction by the trial court was not tainted with grave abuse of discretion. Respondents tried to undo the

issuance of said writ but to no avail. The Resolution on the matter attained finality on 30 July 2005 and an entry of judgment was made. This, notwithstanding, respondents filed with the RTC of Pasig City, Branch 264, an Omnibus Motion (To Resolve Motion to Dismiss Complaint and/or Dissolve Injunction) dated 31 January 2006 praying that their Motion for Reconsideration dated 26 February 2001 of the trial courts denial of their Motion to Dismiss which the trial court failed to resolve, be resolved and/or the Writ of Preliminary Injunction previously issued be dissolved. With this Omnibus Motion, the trial court issued the Order dated 13 August 2001 recalling and dissolving the Writ of Preliminary Injunction conditioned on the filing of a P10,000,000.00 counter-bond. The question is: Under the circumstances obtaining in this case, may the trial court recall and dissolve the preliminary injunction it issued despite the rulings of the Court of Appeals and by this Court that its issuance was not tainted with grave abuse of discretion? We hold that the trial court may still order the dissolution of the preliminary injunction it previously issued. We do not agree with petitioners argument that the trial court may no longer dissolve the preliminary injunction because this Court previously ruled that its issuance was not tainted with grave abuse of discretion. 409

VOL. 550, MARCH 28, 2008 409 Yap vs. International Exchange Bank The issuance of a preliminary injunction is different from its dissolution. Its issuance is governed by Section 3,38 Rule 58 of the 1997 Rules of Civil Procedure while the grounds for its dissolution are contained in Section 6, Rule 58 of the 1997 Rules of Civil Procedure. As long as the party seeking the dissolution of the preliminary injunction can prove the presence of any of the grounds for its dissolution, same may be dissolved notwithstanding that this Court previously ruled that its issuance was not tainted with grave abuse of discretion. Section 6 of Rule 58 reads:

Section 6. Grounds for objection to, or for motion of dissolution of, injunction or restraining order.The application for injunction or restraining order may be denied, upon a showing of its insufficiency. The injunction or restraining order may also be denied, or, if granted, may be dissolved, on other grounds upon affidavits of the party or person enjoined, which may be opposed by the applicant also by affidavits. It may further be denied, or, if granted, may be dissolved, if it appears after hearing that although the applicant is entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be, would cause irreparable damage to the party or person enjoined while the applicant can be fully _______________

38 Section 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or nonperformance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual. 410

410 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank compensated for such damages as he may suffer, and the former files a bond in an amount fixed by the court conditioned that he will pay all damages which the applicant may suffer by the denial or the dissolution of the injunction or

restraining order. If it appears that the extent of the preliminary injunction or restraining order granted is too great, it may be modified. Under the afore-quoted section, a preliminary injunction may be dissolved if it appears after hearing that although the applicant is entitled to the injunction or restraining order, the issuance or continuance thereof, as the case may be, would cause irreparable damage to the party or person enjoined while the applicant can be fully compensated for such damages as he may suffer, and the former files a bond in an amount fixed by the court on condition that he will pay all damages which the applicant may suffer by the denial or the dissolution of the injunction or restraining order. Two conditions must concur: first, the court in the exercise of its discretion, finds that the continuance of the injunction would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he may suffer; second, the defendant files a counter-bond.39 The Order of the trial court dated 29 April 2006 is based on this ground. In the case at bar, the trial court, after hearing, found that respondents duly showed that they would suffer great and irreparable injury if the injunction shall continue to exist. As to the second condition, the trial court likewise found that respondents were willing to post a counter-bond which could cover the damages that petitioners may suffer in case the judgment turns out to be adverse to them. The Order of the trial court to recall and dissolve the preliminary injunction is subject to the filing and approval of the counter-bond that it ordered. Failure to post the required counter-bond will necessarily lead to the non-dissolution of the preliminary injunc_______________

39 Cafino v. Nicolas, G.R. No. 137655, August 25, 1999. 411

VOL. 550, MARCH 28, 2008 411 Yap vs. International Exchange Bank tion. The Order of Dissolution cannot be implemented until and unless the required counter-bond has been posted.

The well-known rule is that the matter of issuance of a writ of preliminary injunction is addressed to the sound judicial discretion of the trial court, and its action shall not be disturbed on appeal unless it is demonstrated that it acted without jurisdiction or in excess of jurisdiction or, otherwise, in grave abuse of discretion. By the same token, the court that issued such a preliminary relief may recall or dissolve the writ as the circumstances may warrant.40 In the case on hand, the trial court issued the order of dissolution on a ground provided for by the Rules of Court. The same being in accordance with the rules, we find no reason to disturb the same. Petitioners contend that the Court of Appeals erred and gravely abused its discretion when it dismissed outright their Petition for Certiorari by failing to apply existing jurisprudence that a motion for reconsideration may be dispensed with where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction. On the other hand, respondents urge the Court to deny the Petition for Review, arguing that the Court of Appeals properly applied the general rule that the filing of a motion for reconsideration is a condition sine qua non in order that certiorari will lie. We find petitioners contention to be untenable. The rule is well settled that the filing of a motion for reconsideration is an indispensable condition to the filing of a special civil action for certiorari.41 It must be stressed that a petition for certiorari is an extraordinary remedy and should be filed only as a last resort. The filing of a motion for reconsideration is intended to afford the trial court an opportunity to _______________

40 Technology Developers, Inc. v. Court of Appeals, G.R. No. 94759, 21 January 1991, 193 SCRA 147, 150. 41 Acance v. Court of Appeals, G.R. No. 159699, 16 March 2005, 453 SCRA 548, 558. 412

412 SUPREME COURT REPORTS ANNOTATED Yap vs. International Exchange Bank

correct any actual error attributed to it by way of re-examination of the legal and factual issues.42 By their failure to file a motion for reconsideration, they deprived the trial court of the opportunity to rectify any error it committed, if there was any. Moreover, a perusal of petitioners petition for certiorari filed with the Court of Appeals shows that they filed the same because there was no appeal, or any plain, speedy and adequate remedy in the course of law except via a petition for certiorari. When same was dismissed by the Court of Appeals for failure to file a motion for reconsideration of the trial courts Order, they argue that while the filing of a motion for reconsideration is a sine qua non before a petition for certiorari is instituted, the same is not entirely without exception like where the controverted act is patently illegal or was performed without jurisdiction or in excess of jurisdiction. It was only when the Court of Appeals dismissed their Petition did they argue that exceptions to the general rule should apply. Their invocation of the application of the exceptions was belatedly made. The application of the exceptions should be raised in their Petition for Certiorari and not when their Petition has already been dismissed. They must give their reasons and explain fully why their case falls under any of the exceptions. This, petitioners failed to do. Petitioners argument that they filed the Petition for Certiorari without filing a motion for reconsideration because there is no appeal, or any plain, speedy and adequate remedy in the course of law except via a Petition for Certiorari does not convince. We have held that the plain and adequate remedy referred to in Section 1, Rule 65 of the Rules of Court is a motion for reconsideration of the assailed Order or Resolution.43 The mere allegation that there is no appeal, or any _______________

42 Nisce v. Equitable PCIBank, Inc., G.R. No. 167434, 19 February 2007, 516 SCRA 231, 251. 43 Flores v. Sangguniang Panlalawigan of Pampanga, G.R. No. 159022, 23 February 2005, 452 SCRA 278, 282. 413

VOL. 550, MARCH 28, 2008 413

Yap vs. International Exchange Bank plain, speedy and adequate remedy is not one of the exceptions to the rule that a motion for reconsideration is a sine qua non before a petition for certiorari may be filed. All told, we hold that the act of the trial court of issuing the Order dated 29 April 2006 was not patently illegal or performed without or in excess of jurisdiction. The Court of Appeals was correct in dismissing outright petitioners Petition for Certiorari for failing to file a motion for reconsideration of the trial courts Order. Our pronouncements in this case are confined only to the issue of the dissolution of the preliminary injunction and will not apply to the merits of the case. WHEREFORE, all considered, the Petition is hereby DENIED. The Resolutions of the Court of Appeals in CA-GR SP No. 95074 dated 11 July 2006 and 9 October 2006 are AFFIRMED. The Order dated 29 April 2006 of Branch 264 of the Regional Trial Court (RTC) of Pasig City in Civil Case No. 68088 recalling and dissolving the Writ of Preliminary Injunction dated 13 August 2001 is AFFIRMED. Upon the posting by respondents of the counter-bond required, the trial court is directed to issue the Writ Dissolving Preliminary Injunction. No costs. SO ORDERED. Austria-Martinez (Acting Chairperson), Tinga,** Nachura and Reyes, JJ., concur. Petition denied, resolutions affirmed. Notes.A partys act of entering a property in defiance of a writ of preliminary injunction constitutes indirect contempt. (Oronce vs. Court of Appeals, 298 SCRA 133 [1998]) _______________

** Per Special Order No. 497, dated 14 March 2008, signed by Chief Justice Reynato S. Puno designating Associate Justice Dante O. Tinga to replace Associate Justice Consuelo Ynares-Santiago, who is on official leave under the Courts Wellness Program and assigning Associate Justice Alicia AustriaMartinez as Acting Chairperson. [Yap vs. International Exchange Bank, 550 SCRA 395(2008)]

Republic SUPREME Manila EN BANC A.M. No. 07-11-08-SC

of

the

Philippines COURT

September 1, 2009

SPECIAL RULES OF COURT ON ALTERNATIVE DISPUTE RESOLUTION Acting on the recommendation of the Chairperson of the Sub-Committee on the Rules on Alternative Dispute Resolution submitting for this Courts consideration and approval the proposed Special Rules of Court on Alternative Dispute Resolution, the Court Resolved to APPROVE the same. This Rule shall take effect on October 30, 2009 following its publication in three (3) newspapers of general circulation. September 1, 2009.

REYNATO Chief Justice LEONARDO A. Associate Justice ANTONIO T. Associate Justice

S. QUISUMBING CONSUELO SANTIAGO Associate Justice CARPIO RENATO C. Associate Justice

PUNO YNARES-

CORONA

CONCHITA CARPIO MORALES MINITA V. CHICO-NAZARIO Associate Justice Associate Justice PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO Associate Justice NACHURA Associate Justice TERESITA J. LEONARDO-DE ARTURO D. CASTRO Associate Justice Associate Justice DIOSDADO M. PERALTA LUCAS P. B.

BRION

BERSAMIN

Associate Justice MARIANO C. DEL Associate Justice

Associate Justice CASTILLO ROBERTO A. Associate Justice ABAD

SPECIAL RULES OF COURT ON ALTERNATIVE DISPUTE RESOLUTION PART GENERAL PROVISIONS AND POLICIES RULE 1: GENERAL PROVISIONS Rule 1.1. Subject matter and governing rules.-The Special Rules of Court on Alternative Dispute Resolution (the "Special ADR Rules") shall apply to and govern the following cases: a. Relief on the issue of Existence, Validity, or Enforceability of the Arbitration Agreement; b. Referral to Alternative Dispute Resolution ("ADR"); c. Interim Measures of Protection; d. Appointment of Arbitrator; e. Challenge to Appointment of Arbitrator; f. Termination of Mandate of Arbitrator; g. Assistance in Taking Evidence; h. Confirmation, Arbitration; Correction or Vacation of Award in Domestic I

i. Recognition and Enforcement or Setting Aside of an Award in International Commercial Arbitration; j. Recognition and Enforcement of a Foreign Arbitral Award; k. Confidentiality/Protective Orders; and l. Deposit and Enforcement of Mediated Settlement Agreements.

Rule 1.2. Nature of the proceedings.-All proceedings under the Special ADR Rules are special proceedings. Rule 1.3. Summary proceedings in certain cases.-The proceedings in the following instances are summary in nature and shall be governed by this provision: a. Judicial Relief Involving the Issue of Enforceability of the Arbitration Agreement; b. Referral to ADR; c. Interim Measures of Protection; d. Appointment of Arbitrator; e. Challenge to Appointment of Arbitrator; f. Termination of Mandate of Arbitrator; g. Assistance in Taking Evidence; h. Confidentiality/Protective Orders; and i. Deposit and Enforcement of Mediated Settlement Agreements. (A) Service and filing of petition in summary proceedings.-The petitioner shall serve, either by personal service or courier, a copy of the petition upon the respondent before the filing thereof. Proof of service shall be attached to the petition filed in court. For personal service, proof of service of the petition consists of the affidavit of the person who effected service, stating the time, place and manner of the service on the respondent. For service by courier, proof of service consists of the signed courier proof of delivery. If service is refused or has failed, the affidavit or delivery receipt must state the circumstances of the attempted service and refusal or failure thereof. (B) Notice.-Except for cases involving Referral to ADR and Confidentiality/Protective Orders made through motions, the court shall, if it finds the petition sufficient in form and substance, send notice to the parties directing them to appear at a particular time and date for the hearing thereof which shall be set no later than five (5) days from the lapse of the period for filing the opposition or comment. The notice to the respondent shall contain a statement allowing him to file a comment or opposition to the petition within fifteen (15) days from receipt of the notice. Existence, Validity or

The motion filed pursuant to the rules on Referral to ADR or Confidentiality/Protective Orders shall be set for hearing by the movant and contain a notice of hearing that complies with the requirements under Rule 15 of the Rules of Court on motions. (C) Summary hearing. - In all cases, as far as practicable, the summary hearing shall be conducted in one (1) day and only for purposes of clarifying facts. Except in cases involving Referral to ADR or Confidentiality/Protective Orders made through motions, it shall be the court that sets the petition for hearing within five (5) days from the lapse of the period for filing the opposition or comment. (D) Resolution. - The court shall resolve the matter within a period of thirty (30) days from the day of the hearing. Rule 1.4. Verification and submissions. -Any pleading, motion, opposition, comment, defense or claim filed under the Special ADR Rules by the proper party shall be supported by verified statements that the affiant has read the same and that the factual allegations therein are true and correct of his own personal knowledge or based on authentic records and shall contain as annexes the supporting documents. The annexes to the pleading, motion, opposition, comment, defense or claim filed by the proper party may include a legal brief, duly verified by the lawyer submitting it, stating the pertinent facts, the applicable law and jurisprudence to justify the necessity for the court to rule upon the issue raised. Rule 1.5. Certification Against Forum Shopping. - A Certification Against Forum Shopping is one made under oath made by the petitioner or movant: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforementioned petition or motion has been filed. A Certification Against Forum Shopping shall be appended to all initiatory pleadings except a Motion to Refer the Dispute to Alternative Dispute Resolution. Rule 1.6. Prohibited submissions. - The following pleadings, motions, or petitions shall not be allowed in the cases governed by the Special ADR Rules and shall not be accepted for filing by the Clerk of Court:

a. Motion to dismiss; b. Motion for bill of particulars; c. Motion for new trial or for reopening of trial; d. Petition for relief from judgment; e. Motion for extension, except in cases where an ex-parte temporary order of protection has been issued; f. Rejoinder to reply; g. Motion to declare a party in default; and h. Any other pleading specifically disallowed under any provision of the Special ADR Rules. The court shall motu proprio order a pleading/motion that it has determined to be dilatory in nature be expunged from the records. Rule 1.7. Computation of time. - In computing any period of time prescribed or allowed by the Special ADR Rules, or by order of the court, or by any applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next working day. Should an act be done which effectively interrupts the running of the period, the allowable period after such interruption shall start to run on the day after notice of the cessation of the cause thereof. The day of the act that caused the interruption shall be excluded from the computation of the period. Rule 1.8. Service and filing of pleadings, motions and other papers in nonsummary proceedings. - The initiatory pleadings shall be filed directly with the court. The court will then cause the initiatory pleading to be served upon the respondent by personal service or courier. Where an action is already pending, pleadings, motions and other papers shall be filed and/or served by the concerned party by personal service or courier. Where courier services are not available, resort to registered mail is allowed. (A) Proof of filing. - The filing of a pleading shall be proved by its existence in the record of the case. If it is not in the record, but is claimed to have been filed

personally, the filing shall be proved by the written or stamped acknowledgment of its filing by the clerk of court on a copy of the same; if filed by courier, by the proof of delivery from the courier company. (B) Proof of service. - Proof of personal service shall consist of a written admission by the party served, or the official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of service. If the service is by courier, proof thereof shall consist of an affidavit of the proper person, stating facts showing that the document was deposited with the courier company in a sealed envelope, plainly addressed to the party at his office, if known, otherwise at his residence, with postage fully pre-paid, and with instructions to the courier to immediately provide proof of delivery. (C) Filing and service by electronic means and proof thereof . - Filing and service of pleadings by electronic transmission may be allowed by agreement of the parties approved by the court. If the filing or service of a pleading or motion was done by electronic transmission, proof of filing and service shall be made in accordance with the Rules on Electronic Evidence. Rule 1.9. No summons. - In cases covered by the Special ADR Rules, a court acquires authority to act on the petition or motion upon proof of jurisdictional facts, i.e., that the respondent was furnished a copy of the petition and the notice of hearing. (A) Proof of service. - A proof of service of the petition and notice of hearing upon respondent shall be made in writing by the server and shall set forth the manner, place and date of service. (B) Burden of proof. - The burden of showing that a copy of the petition and the notice of hearing were served on the respondent rests on the petitioner. The technical rules on service of summons do not apply to the proceedings under the Special ADR Rules. In instances where the respondent, whether a natural or a juridical person, was not personally served with a copy of the petition and notice of hearing in the proceedings contemplated in the first paragraph of Rule 1.3 (B), or the motion in proceedings contemplated in the second paragraph of Rule 1.3 (B), the method of service resorted to must be such as to reasonably ensure receipt thereof by the respondent to satisfy the requirement of due process. Rule 1.10. Contents of petition/motion. - The initiatory pleading in the form of a verified petition or motion, in the appropriate case where court proceedings have already commenced, shall include the names of the parties, their addresses, the necessary allegations supporting the petition and the relief(s) sought.

Rule 1.11. Definition. - The following terms shall have the following meanings: a. "ADR Laws" refers to the whole body of ADR laws in the Philippines. b. "Appointing Authority" shall mean the person or institution named in the arbitration agreement as the appointing authority; or the regular arbitration institution under whose rule the arbitration is agreed to be conducted. Where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to have agreed to procedure under such arbitration rules for the selection and appointment of arbitrators. In ad hoc arbitration, the default appointment of arbitrators shall be made by the National President of the Integrated Bar of the Philippines or his duly authorized representative. c. "Authenticate" means to sign, execute or use a symbol, or encrypt a record in whole or in part, intended to identify the authenticating party and to adopt, accept or establish the authenticity of a record or term. d. "Foreign Arbitral Award" is one made in a country other than the Philippines. e. "Legal Brief" is a written legal argument submitted to a court, outlining the facts derived from the factual statements in the witnesss statements of fact and citing the legal authorities relied upon by a party in a case submitted in connection with petitions, counter-petitions (i.e., petitions to vacate or to set aside and/or to correct/modify in opposition to petitions to confirm or to recognize and enforce, or petitions to confirm or to recognize and enforce in opposition to petitions to vacate or set aside and/or correct/modify), motions, evidentiary issues and other matters that arise during the course of a case. The legal brief shall state the applicable law and the relevant jurisprudence and the legal arguments in support of a partys position in the case. f. "Verification" shall mean a certification under oath by a party or a person who has authority to act for a party that he has read the pleading/motion, and that he certifies to the truth of the facts stated therein on the basis of his own personal knowledge or authentic documents in his possession. When made by a lawyer, verification shall mean a statement under oath by a lawyer signing a pleading/motion for delivery to the Court or to the parties that he personally prepared the pleading/motion, that there is sufficient factual basis for the statements of fact stated therein, that there is sufficient basis in the facts and the law to support the prayer for relief therein, and that the pleading/motion is filed in good faith and is not interposed for delay.

Rule 1.12. Applicability of Part II on Specific Court Relief . - Part II of the Special ADR Rules on Specific Court Relief, insofar as it refers to arbitration, shall also be applicable to other forms of ADR. Rule 1.13. Spirit and intent of the Special ADR Rules. In situations where no specific rule is provided under the Special ADR Rules, the court shall resolve such matter summarily and be guided by the spirit and intent of the Special ADR Rules and the ADR Laws. RULE 2: STATEMENT OF POLICIES Rule 2.1. General policies. - It is the policy of the State to actively promote the use of various modes of ADR and to respect party autonomy or the freedom of the parties to make their own arrangements in the resolution of disputes with the greatest cooperation of and the least intervention from the courts. To this end, the objectives of the Special ADR Rules are to encourage and promote the use of ADR, particularly arbitration and mediation, as an important means to achieve speedy and efficient resolution of disputes, impartial justice, curb a litigious culture and to de-clog court dockets. The court shall exercise the power of judicial review as provided by these Special ADR Rules. Courts shall intervene only in the cases allowed by law or these Special ADR Rules. Rule 2.2. Policy on arbitration.- (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: a. The referral tends to oust a court of its jurisdiction; b. The court is in a better position to resolve the dispute subject of arbitration; c. The referral would result in multiplicity of suits; d. The arbitration proceeding has not commenced; e. The place of arbitration is in a foreign country; f. One or more of the issues are legal and one or more of the arbitrators are not lawyers; g. One or more of the arbitrators are not Philippine nationals; or

h. One or more of the arbitrators are alleged not to possess the required qualification under the arbitration agreement or law. (B) Where court intervention is allowed under ADR Laws or the Special ADR Rules, courts shall not refuse to grant relief, as provided herein, for any of the following reasons: a. Prior to the constitution of the arbitral tribunal, the court finds that the principal action is the subject of an arbitration agreement; or b. The principal action is already pending before an arbitral tribunal. The Special ADR Rules recognize the principle of competence-competence, which means that the arbitral tribunal may initially rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request for arbitration. The Special ADR Rules recognize the principle of separability of the arbitration clause, which means that said clause shall be treated as an agreement independent of the other terms of the contract of which it forms part. A decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Rule 2.3. Rules governing arbitral proceedings. - The parties are free to agree on the procedure to be followed in the conduct of arbitral proceedings. Failing such agreement, the arbitral tribunal may conduct arbitration in the manner it considers appropriate. Rule 2.4. Policy implementing competence-competence principle. - The arbitral tribunal shall be accorded the first opportunity or competence to rule on the issue of whether or not it has the competence or jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to rule upon such issues. Where the court is asked to make a determination of whether the arbitration agreement is null and void, inoperative or incapable of being performed, under this policy of judicial restraint, the court must make no more than a prima facie determination of that issue.

Unless the court, pursuant to such prima facie determination, concludes that the arbitration agreement is null and void, inoperative or incapable of being performed, the court must suspend the action before it and refer the parties to arbitration pursuant to the arbitration agreement. Rule 2.5. Policy on mediation. - The Special ADR Rules do not apply to CourtAnnexed Mediation, which shall be governed by issuances of the Supreme Court. Where the parties have agreed to submit their dispute to mediation, a court before which that dispute was brought shall suspend the proceedings and direct the parties to submit their dispute to private mediation. If the parties subsequently agree, however, they may opt to have their dispute settled through Court-Annexed Mediation. Rule 2.6. Policy on Arbitration-Mediation or Mediation-Arbitration. - No arbitrator shall act as a mediator in any proceeding in which he is acting as arbitrator; and all negotiations towards settlement of the dispute must take place without the presence of that arbitrator. Conversely, no mediator shall act as arbitrator in any proceeding in which he acted as mediator. Rule 2.7. Conversion of a settlement agreement to an arbitral award. - Where the parties to mediation have agreed in the written settlement agreement that the mediator shall become the sole arbitrator for the dispute or that the settlement agreement shall become an arbitral award, the sole arbitrator shall issue the settlement agreement as an arbitral award, which shall be subject to enforcement under the law. PART SPECIFIC COURT RELIEF II

RULE 3: JUDICIAL RELIEF INVOLVING THE ISSUE OF EXISTENCE, VALIDITY AND ENFORCEABILITY OF THE ARBITRATION AGREEMENT Rule 3.1. When judicial relief is available. - The judicial relief provided in Rule 3, whether resorted to before or after commencement of arbitration, shall apply only when the place of arbitration is in the Philippines. A. Judicial Relief before Commencement of Arbitration Rule 3.2. Who may file petition. - Any party to an arbitration agreement may petition the appropriate court to determine any question concerning the existence, validity and enforceability of such arbitration agreement serving a copy thereof on the respondent in accordance with Rule 1.4 (A).

Rule 3.3. When the petition may be filed. - The petition for judicial determination of the existence, validity and/or enforceability of an arbitration agreement may be filed at any time prior to the commencement of arbitration. Despite the pendency of the petition provided herein, arbitral proceedings may nevertheless be commenced and continue to the rendition of an award, while the issue is pending before the court. Rule 3.4. Venue. - A petition questioning the existence, validity and enforceability of an arbitration agreement may be filed before the Regional Trial Court of the place where any of the petitioners or respondents has his principal place of business or residence. Rule 3.5. Grounds. - A petition may be granted only if it is shown that the arbitration agreement is, under the applicable law, invalid, void, unenforceable or inexistent. Rule 3.6. Contents of petition. - The verified petition shall state the following: a. The facts showing that the persons named as petitioner or respondent have legal capacity to sue or be sued; b. The nature and substance of the dispute between the parties; c. The grounds and the circumstances relied upon by the petitioner to establish his position; and d. The relief/s sought. Apart from other submissions, the petitioner must attach to the petition an authentic copy of the arbitration agreement. Rule 3.7. Comment/Opposition.-The comment/opposition of the respondent must be filed within fifteen (15) days from service of the petition. Rule 3.8. Court action. - In resolving the petition, the court must exercise judicial restraint in accordance with the policy set forth in Rule 2.4, deferring to the competence or jurisdiction of the arbitral tribunal to rule on its competence or jurisdiction. Rule 3.9. No forum shopping. - A petition for judicial relief under this Rule may not be commenced when the existence, validity or enforceability of an arbitration agreement has been raised as one of the issues in a prior action before the same or another court.

Rule 3.10. Application for interim relief . - If the petitioner also applies for an interim measure of protection, he must also comply with the requirements of the Special ADR Rules for the application for an interim measure of protection. Rule 3.11. Relief against court action. - Where there is a prima facie determination upholding the arbitration agreement.-A prima facie determination by the court upholding the existence, validity or enforceability of an arbitration agreement shall not be subject to a motion for reconsideration, appeal or certiorari. Such prima facie determination will not, however, prejudice the right of any party to raise the issue of the existence, validity and enforceability of the arbitration agreement before the arbitral tribunal or the court in an action to vacate or set aside the arbitral award. In the latter case, the courts review of the arbitral tribunals ruling upholding the existence, validity or enforceability of the arbitration agreement shall no longer be limited to a mere prima facie determination of such issue or issues as prescribed in this Rule, but shall be a full review of such issue or issues with due regard, however, to the standard for review for arbitral awards prescribed in these Special ADR Rules. B. Judicial Relief after Arbitration Commences Rule 3.12. Who may file petition. - Any party to arbitration may petition the appropriate court for judicial relief from the ruling of the arbitral tribunal on a preliminary question upholding or declining its jurisdiction. Should the ruling of the arbitral tribunal declining its jurisdiction be reversed by the court, the parties shall be free to replace the arbitrators or any one of them in accordance with the rules that were applicable for the appointment of arbitrator sought to be replaced. Rule 3.13. When petition may be filed. - The petition may be filed within thirty (30) days after having received notice of that ruling by the arbitral tribunal. Rule 3.14. Venue. - The petition may be filed before the Regional Trial Court of the place where arbitration is taking place, or where any of the petitioners or respondents has his principal place of business or residence. Rule 3.15. Grounds. - The petition may be granted when the court finds that the arbitration agreement is invalid, inexistent or unenforceable as a result of which the arbitral tribunal has no jurisdiction to resolve the dispute. Rule 3.16. Contents of petition. - The petition shall state the following: a. The facts showing that the person named as petitioner or respondent has legal capacity to sue or be sued;

b. The nature and substance of the dispute between the parties; c. The grounds and the circumstances relied upon by the petitioner; and d. The relief/s sought. In addition to the submissions, the petitioner shall attach to the petition a copy of the request for arbitration and the ruling of the arbitral tribunal. The arbitrators shall be impleaded as nominal parties to the case and shall be notified of the progress of the case. Rule 3.17. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. Rule 3.18. Court action. - (A) Period for resolving the petition.- The court shall render judgment on the basis of the pleadings filed and the evidence, if any, submitted by the parties, within thirty (30) days from the time the petition is submitted for resolution. (B) No injunction of arbitration proceedings. - The court shall not enjoin the arbitration proceedings during the pendency of the petition. Judicial recourse to the court shall not prevent the arbitral tribunal from continuing the proceedings and rendering its award. (C) When dismissal of petition is appropriate. - The court shall dismiss the petition if it fails to comply with Rule 3.16 above; or if upon consideration of the grounds alleged and the legal briefs submitted by the parties, the petition does not appear to be prima facie meritorious. Rule 3.19. Relief against court action. - The aggrieved party may file a motion for reconsideration of the order of the court. The decision of the court shall, however, not be subject to appeal. The ruling of the court affirming the arbitral tribunals jurisdiction shall not be subject to a petition for certiorari. The ruling of the court that the arbitral tribunal has no jurisdiction may be the subject of a petition for certiorari. Rule 3.20. Where no petition is allowed. - Where the arbitral tribunal defers its ruling on preliminary question regarding its jurisdiction until its final award, the aggrieved party cannot seek judicial relief to question the deferral and must await the final arbitral award before seeking appropriate judicial recourse. A ruling by the arbitral tribunal deferring resolution on the issue of its jurisdiction until final award, shall not be subject to a motion for reconsideration, appeal or a petition for certiorari.

Rule 3.21. Rendition of arbitral award before court decision on petition from arbitral tribunals preliminary ruling on jurisdiction. - If the arbitral tribunal renders a final arbitral award and the Court has not rendered a decision on the petition from the arbitral tribunals preliminary ruling affirming its jurisdiction, that petition shall become ipso facto moot and academic and shall be dismissed by the Regional Trial Court. The dismissal shall be without prejudice to the right of the aggrieved party to raise the same issue in a timely petition to vacate or set aside the award. Rule 3.22. Arbitral tribunal a nominal party. - The arbitral tribunal is only a nominal party. The court shall not require the arbitral tribunal to submit any pleadings or written submissions but may consider the same should the latter participate in the proceedings, but only as nominal parties thereto. RULE 4: REFERRAL TO ADR Rule 4.1. Who makes the request. - A party to a pending action filed in violation of the arbitration agreement, whether contained in an arbitration clause or in a submission agreement, may request the court to refer the parties to arbitration in accordance with such agreement. Rule 4.2. When to make request. - (A) Where the arbitration agreement exists before the action is filed. - The request for referral shall be made not later than the pre-trial conference. After the pre-trial conference, the court will only act upon the request for referral if it is made with the agreement of all parties to the case. (B) Submission agreement. - If there is no existing arbitration agreement at the time the case is filed but the parties subsequently enter into an arbitration agreement, they may request the court to refer their dispute to arbitration at any time during the proceedings. Rule 4.3. Contents of request. - The request for referral shall be in the form of a motion, which shall state that the dispute is covered by an arbitration agreement. Apart from other submissions, the movant shall attach to his motion an authentic copy of the arbitration agreement. The request shall contain a notice of hearing addressed to all parties specifying the date and time when it would be heard. The party making the request shall serve it upon the respondent to give him the opportunity to file a comment or opposition as provided in the immediately succeeding Rule before the hearing. Rule 4.4. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The comment/opposition should

show that: (a) there is no agreement to refer the dispute to arbitration; and/or (b) the agreement is null and void; and/or (c) the subject-matter of the dispute is not capable of settlement or resolution by arbitration in accordance with Section 6 of the ADR Act. Rule 4.5. Court action. - After hearing, the court shall stay the action and, considering the statement of policy embodied in Rule 2.4, above, refer the parties to arbitration if it finds prima facie, based on the pleadings and supporting documents submitted by the parties, that there is an arbitration agreement and that the subject-matter of the dispute is capable of settlement or resolution by arbitration in accordance with Section 6 of the ADR Act. Otherwise, the court shall continue with the judicial proceedings. Rule 4.6. No reconsideration, appeal or certiorari. - An order referring the dispute to arbitration shall be immediately executory and shall not be subject to a motion for reconsideration, appeal or petition for certiorari. An order denying the request to refer the dispute to arbitration shall not be subject to an appeal, but may be the subject of a motion for reconsideration and/or a petition for certiorari. Rule 4.7. Multiple actions and parties. - The court shall not decline to refer some or all of the parties to arbitration for any of the following reasons: a. Not all of the disputes subject of the civil action may be referred to arbitration; b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits; c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the court rather than in arbitration; d. Referral to arbitration does not appear to be the most prudent action; or e. The stay of the action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement. The court may, however, issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion. Rule 4.8. Arbitration to proceed.- Despite the pendency of the action referred to in Rule 4.1, above, arbitral proceedings may nevertheless be commenced or

continued, and an award may be made, while the action is pending before the court. RULE 5: INTERIM MEASURES OF PROTECTION Rule 5.1. Who may ask for interim measures of protection . - A party to an arbitration agreement may petition the court for interim measures of protection. Rule 5.2. When to petition. - A petition for an interim measure of protection may be made (a) before arbitration is commenced, (b) after arbitration is commenced, but before the constitution of the arbitral tribunal, or (c) after the constitution of the arbitral tribunal and at any time during arbitral proceedings but, at this stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively. Rule 5.3. Venue. - A petition for an interim measure of protection may be filed with the Regional Trial Court, which has jurisdiction over any of the following places: a. Where the principal place of business of any of the parties to arbitration is located; b. Where any of the parties who are individuals resides; c. Where any of the acts sought to be enjoined are being performed, threatened to be performed or not being performed; or d. Where the real property subject of arbitration, or a portion thereof is situated. Rule 5.4. Grounds. - The following grounds, while not limiting the reasons for the court to grant an interim measure of protection, indicate the nature of the reasons that the court shall consider in granting the relief: a. The need to prevent irreparable loss or injury; b. The need to provide security for the performance of any obligation; c. The need to produce or preserve evidence; or d. The need to compel any other appropriate act or omission. Rule 5.5. Contents of the petition. - The verified petition must state the following:

a. The fact that there is an arbitration agreement; b. The fact that the arbitral tribunal has not been constituted, or if constituted, is unable to act or would be unable to act effectively; c. A detailed description of the appropriate relief sought; d. The grounds relied on for the allowance of the petition Apart from other submissions, the petitioner must attach to his petition an authentic copy of the arbitration agreement. Rule 5.6. Type of interim measure of protection that a court may grant.- The following, among others, are the interim measures of protection that a court may grant: a. Preliminary injunction directed against a party to arbitration; b. Preliminary attachment against property or garnishment of funds in the custody of a bank or a third person; c. Appointment of a receiver; d. Detention, preservation, delivery or inspection of property; or, e. Assistance in the enforcement of an interim measure of protection granted by the arbitral tribunal, which the latter cannot enforce effectively. Rule 5.7. Dispensing with prior notice in certain cases. - Prior notice to the other party may be dispensed with when the petitioner alleges in the petition that there is an urgent need to either (a) preserve property, (b) prevent the respondent from disposing of, or concealing, the property, or (c) prevent the relief prayed for from becoming illusory because of prior notice, and the court finds that the reason/s given by the petitioner are meritorious. Rule 5.8. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment should state the reasons why the interim measure of protection should not be granted. Rule 5.9. Court action. - After hearing the petition, the court shall balance the relative interests of the parties and inconveniences that may be caused, and on that basis resolve the matter within thirty (30) days from (a) submission of the opposition, or (b) upon lapse of the period to file the same, or (c) from termination of the hearing that the court may set only if there is a need for clarification or further argument.

If the other parties fail to file their opposition on or before the day of the hearing, the court shall motu propriorender judgment only on the basis of the allegations in the petition that are substantiated by supporting documents and limited to what is prayed for therein. In cases where, based solely on the petition, the court finds that there is an urgent need to either (a) preserve property, (b) prevent the respondent from disposing of, or concealing, the property, or (c) prevent the relief prayed for from becoming illusory because of prior notice, it shall issue an immediately executory temporary order of protection and require the petitioner, within five (5) days from receipt of that order, to post a bond to answer for any damage that respondent may suffer as a result of its order. The ex-parte temporary order of protection shall be valid only for a period of twenty (20) days from the service on the party required to comply with the order. Within that period, the court shall: a. Furnish the respondent a copy of the petition and a notice requiring him to comment thereon on or before the day the petition will be heard; and b. Notify the parties that the petition shall be heard on a day specified in the notice, which must not be beyond the twenty (20) day period of the effectivity of the ex-parte order. The respondent has the option of having the temporary order of protection lifted by posting an appropriate counter-bond as determined by the court. If the respondent requests the court for an extension of the period to file his opposition or comment or to reset the hearing to a later date, and such request is granted, the court shall extend the period of validity of the ex-partetemporary order of protection for no more than twenty days from expiration of the original period. After notice and hearing, the court may either grant or deny the petition for an interim measure of protection. The order granting or denying any application for interim measure of protection in aid of arbitration must indicate that it is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by an arbitral tribunal. Rule 5.10. Relief against court action. - If respondent was given an opportunity to be heard on a petition for an interim measure of protection, any order by the court shall be immediately executory, but may be the subject of a motion for reconsideration and/or appeal or, if warranted, a petition for certiorari. Rule 5.11. Duty of the court to refer back. - The court shall not deny an application for assistance in implementing or enforcing an interim measure of

protection ordered by an arbitral tribunal on any or all of the following grounds: a. The arbitral tribunal granted the interim relief ex parte; or b. The party opposing the application found new material evidence, which the arbitral tribunal had not considered in granting in the application, and which, if considered, may produce a different result; or c. The measure of protection ordered by the arbitral tribunal amends, revokes, modifies or is inconsistent with an earlier measure of protection issued by the court. If it finds that there is sufficient merit in the opposition to the application based on letter (b) above, the court shall refer the matter back to the arbitral tribunal for appropriate determination. Rule 5.12. Security. - The order granting an interim measure of protection may be conditioned upon the provision of security, performance of an act, or omission thereof, specified in the order. The Court may not change or increase or decrease the security ordered by the arbitral tribunal. Rule 5.13. Modification, amendment, revision or revocation of courts previously issued interim measure of protection. - Any court order granting or denying interim measure/s of protection is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by the arbitral tribunal as may be warranted. An interim measure of protection issued by the arbitral tribunal shall, upon its issuance be deemed to have ipso jure modified, amended, revised or revoked an interim measure of protection previously issued by the court to the extent that it is inconsistent with the subsequent interim measure of protection issued by the arbitral tribunal. Rule 5.14. Conflict or inconsistency between interim measure of protection issued by the court and by the arbitral tribunal. - Any question involving a conflict or inconsistency between an interim measure of protection issued by the court and by the arbitral tribunal shall be immediately referred by the court to the arbitral tribunal which shall have the authority to decide such question. Rule 5.15. Court to defer action on petition for an interim measure of protection when informed of constitution of the arbitral tribunal. - The court shall defer action on any pending petition for an interim measure of protection filed by a

party to an arbitration agreement arising from or in connection with a dispute thereunder upon being informed that an arbitral tribunal has been constituted pursuant to such agreement. The court may act upon such petition only if it is established by the petitioner that the arbitral tribunal has no power to act on any such interim measure of protection or is unable to act thereon effectively. Rule 5.16. Court assistance should arbitral tribunal be unable to effectively enforce interim measure of protection. - The court shall assist in the enforcement of an interim measure of protection issued by the arbitral tribunal which it is unable to effectively enforce. RULE 6: APPOINTMENT OF ARBITRATORS Rule 6.1. When the court may act as Appointing Authority. - The court shall act as Appointing Authority only in the following instances: a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of three arbitrators), and the institution under whose rules arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a reasonable time from receipt of the request for appointment; b. In all instances where arbitration is ad hoc and the parties failed to provide a method for appointing or replacing an arbitrator, or substitute arbitrator, or the method agreed upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment; c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter fails or refuses to act or appoint an arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed arbitrator/s

may request the court to appoint an arbitrator or the third arbitrator as the case may be. Rule 6.2. Who may request for appointment. - Any party to an arbitration may request the court to act as an Appointing Authority in the instances specified in Rule 6.1 above. Rule 6.3. Venue. - The petition for appointment of arbitrator may be filed, at the option of the petitioner, in the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region. Rule 6.4. Contents of the petition. -The petition shall state the following: a. The general nature of the dispute; b. If the parties agreed on an appointment procedure, a description of that procedure with reference to the agreement where such may be found; c. The number of arbitrators agreed upon or the absence of any agreement as to the number of arbitrators; d. The special qualifications that the arbitrator/s must possess, if any, that were agreed upon by the parties; e. The fact that the Appointing Authority, without justifiable cause, has failed or refused to act as such within the time prescribed or in the absence thereof, within a reasonable time, from the date a request is made; and f. The petitioner is not the cause of the delay in, or failure of, the appointment of the arbitrator. Apart from other submissions, the petitioner must attach to the petition (a) an authentic copy of the arbitration agreement, and (b) proof that the Appointing Authority has been notified of the filing of the petition for appointment with the court. Rule 6.5. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. Rule 6.6. Submission of list of arbitrators. - The court may, at its option, also require each party to submit a list of not less than three (3) proposed arbitrators together with their curriculum vitae.

Rule 6.7. Court action. - After hearing, if the court finds merit in the petition, it shall appoint an arbitrator; otherwise, it shall dismiss the petition. In making the appointment, the court shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator. At any time after the petition is filed and before the court makes an appointment, it shall also dismiss the petition upon being informed that the Appointing Authority has already made the appointment. Rule 6.8. Forum shopping prohibited. - When there is a pending petition in another court to declare the arbitration agreement inexistent, invalid, unenforceable, on account of which the respondent failed or refused to participate in the selection and appointment of a sole arbitrator or to appoint a party-nominated arbitrator, the petition filed under this rule shall be dismissed. Rule 6.9. Relief against court action. - If the court appoints an arbitrator, the order appointing an arbitrator shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal or certiorari. An order of the court denying the petition for appointment of an arbitrator may, however, be the subject of a motion for reconsideration, appeal or certiorari. RULE 7: CHALLENGE TO APPOINTMENT OF ARBITRATOR Rule 7.1. Who may challenge. - Any of the parties to an arbitration may challenge an arbitrator. Rule 7.2. When challenge may be raised in court. - When an arbitrator is challenged before the arbitral tribunal under the procedure agreed upon by the parties or under the procedure provided for in Article 13 (2) of the Model Law and the challenge is not successful, the aggrieved party may request the Appointing Authority to rule on the challenge, and it is only when such Appointing Authority fails or refuses to act on the challenge within such period as may be allowed under the applicable rule or in the absence thereof, within thirty (30) days from receipt of the request, that the aggrieved party may renew the challenge in court. Rule 7.3. Venue. - The challenge shall be filed with the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region. Rule 7.4. Grounds. - An arbitrator may be challenged on any of the grounds for challenge provided for in Republic Act No. 9285 and its implementing rules,

Republic Act No. 876 or the Model Law. The nationality or professional qualification of an arbitrator is not a ground to challenge an arbitrator unless the parties have specified in their arbitration agreement a nationality and/or professional qualification for appointment as arbitrator. Rule 7.5. Contents of the petition. - The petition shall state the following: a. The name/s of the arbitrator/s challenged and his/their address; b. The grounds for the challenge; c. The facts showing that the ground for the challenge has been expressly or impliedly rejected by the challenged arbitrator/s; and d. The facts showing that the Appointing Authority failed or refused to act on the challenge. The court shall dismiss the petition motu proprio unless it is clearly alleged therein that the Appointing Authority charged with deciding the challenge, after the resolution of the arbitral tribunal rejecting the challenge is raised or contested before such Appointing Authority, failed or refused to act on the challenge within thirty (30) days from receipt of the request or within such longer period as may apply or as may have been agreed upon by the parties. Rule 7.6. Comment/Opposition. - The challenged arbitrator or other parties may file a comment or opposition within fifteen (15) days from service of the petition. Rule 7.7. Court action. - After hearing, the court shall remove the challenged arbitrator if it finds merit in the petition; otherwise, it shall dismiss the petition. The court shall allow the challenged arbitrator who subsequently agrees to accept the challenge to withdraw as arbitrator. The court shall accept the challenge and remove the arbitrator in the following cases: a. The party or parties who named and appointed the challenged arbitrator agree to the challenge and withdraw the appointment. b. The other arbitrators in the arbitral tribunal agree to the removal of the challenged arbitrator; and c. The challenged arbitrator fails or refuses to submit his comment on the petition or the brief of legal arguments as directed by the court, or in

such comment or legal brief, he fails to object to his removal following the challenge. The court shall decide the challenge on the basis of evidence submitted by the parties. The court will decide the challenge on the basis of the evidence submitted by the parties in the following instances: a. The other arbitrators in the arbitral tribunal agree to the removal of the challenged arbitrator; and b. If the challenged arbitrator fails or refuses to submit his comment on the petition or the brief of legal arguments as directed by the court, or in such comment or brief of legal arguments, he fails to object to his removal following the challenge. Rule 7.8. No motion for reconsideration, appeal or certiorari. - Any order of the court resolving the petition shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal, or certiorari. Rule 7.9. Reimbursement of expenses and reasonable compensation to challenged arbitrator. - Unless the bad faith of the challenged arbitrator is established with reasonable certainty by concealing or failing to disclose a ground for his disqualification, the challenged arbitrator shall be entitled to reimbursement of all reasonable expenses he may have incurred in attending to the arbitration and to a reasonable compensation for his work on the arbitration. Such expenses include, but shall not be limited to, transportation and hotel expenses, if any. A reasonable compensation shall be paid to the challenged arbitrator on the basis of the length of time he has devoted to the arbitration and taking into consideration his stature and reputation as an arbitrator. The request for reimbursement of expenses and for payment of a reasonable compensation shall be filed in the same case and in the court where the petition to replace the challenged arbitrator was filed. The court, in determining the amount of the award to the challenged arbitrator, shall receive evidence of expenses to be reimbursed, which may consist of air tickets, hotel bills and expenses, and inland transportation. The court shall direct the challenging party to pay the amount of the award to the court for the account of the challenged arbitrator, in default of which the court may issue a writ of execution to enforce the award. RULE 8: TERMINATION OF THE MANDATE OF ARBITRATOR Rule 8.1. Who may request termination and on what grounds.- Any of the parties to an arbitration may request for the termination of the mandate of an arbitrator where an arbitrator becomes de jure or de facto unable to perform

his function or for other reasons fails to act without undue delay and that arbitrator, upon request of any party, fails or refuses to withdraw from his office. Rule 8.2. When to request. - If an arbitrator refuses to withdraw from his office, and subsequently, the Appointing Authority fails or refuses to decide on the termination of the mandate of that arbitrator within such period as may be allowed under the applicable rule or, in the absence thereof, within thirty (30) days from the time the request is brought before him, any party may file with the court a petition to terminate the mandate of that arbitrator. Rule 8.3. Venue. - A petition to terminate the mandate of an arbitrator may, at that petitioners option, be filed with the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) where any of the parties who are individuals resides, or (c) in the National Capital Region. Rule 8.4. Contents of the petition. - The petition shall state the following: a. The name of the arbitrator whose mandate is sought to be terminated; b. The ground/s for termination; c. The fact that one or all of the parties had requested the arbitrator to withdraw but he failed or refused to do so; d. The fact that one or all of the parties requested the Appointing Authority to act on the request for the termination of the mandate of the arbitrator and failure or inability of the Appointing Authority to act within thirty (30) days from the request of a party or parties or within such period as may have been agreed upon by the parties or allowed under the applicable rule. The petitioner shall further allege that one or all of the parties had requested the arbitrator to withdraw but he failed or refused to do so. Rule 8.5. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. Rule 8.6. Court action. - After hearing, if the court finds merit in the petition, it shall terminate the mandate of the arbitrator who refuses to withdraw from his office; otherwise, it shall dismiss the petition. Rule 8.7. No motion for reconsideration or appeal. - Any order of the court resolving the petition shall be immediately executory and shall not be subject of a motion for reconsideration, appeal or petition for certiorari.

Rule 8.8. Appointment of substitute arbitrator. - Where the mandate of an arbitrator is terminated, or he withdraws from office for any other reason, or because of his mandate is revoked by agreement of the parties or is terminated for any other reason, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. RULE 9: ASSISTANCE IN TAKING EVIDENCE Rule 9.1. Who may request assistance. - Any party to an arbitration, whether domestic or foreign, may request the court to provide assistance in taking evidence. Rule 9.2. When assistance may be sought. - Assistance may be sought at any time during the course of the arbitral proceedings when the need arises. Rule 9.3. Venue. - A petition for assistance in taking evidence may, at the option of the petitioner, be filed with Regional Trial Court where (a) arbitration proceedings are taking place, (b) the witnesses reside or may be found, or (c) where the evidence may be found. Rule 9.4. Ground. - The court may grant or execute the request for assistance in taking evidence within its competence and according to the rules of evidence. Rule 9.5. Type of assistance. - A party requiring assistance in the taking of evidence may petition the court to direct any person, including a representative of a corporation, association, partnership or other entity (other than a party to the ADR proceedings or its officers) found in the Philippines, for any of the following: a. To comply with a subpoena ad testificandum and/or subpoena duces tecum; b. To appear as a witness before an officer for the taking of his deposition upon oral examination or by written interrogatories; c. To allow the physical examination of the condition of persons, or the inspection of things or premises and, when appropriate, to allow the recording and/or documentation of condition of persons, things or premises (i.e., photographs, video and other means of recording/documentation); d. To allow the examination and copying of documents; and e. To perform any similar acts.

Rule 9.6. Contents of the petition. - The petition must state the following: a. The fact that there is an ongoing arbitration proceeding even if such proceeding could not continue due to some legal impediments; b. The arbitral tribunal ordered the taking of evidence or the party desires to present evidence to the arbitral tribunal; c. Materiality or relevance of the evidence to be taken; and d. The names and addresses of the intended witness/es, place where the evidence may be found, the place where the premises to be inspected are located or the place where the acts required are to be done. Rule 9.7. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. Rule 9.8. Court action. - If the evidence sought is not privileged, and is material and relevant, the court shall grant the assistance in taking evidence requested and shall order petitioner to pay costs attendant to such assistance. Rule 9.9. Relief against court action. - The order granting assistance in taking evidence shall be immediately executory and not subject to reconsideration or appeal. If the court declines to grant assistance in taking evidence, the petitioner may file a motion for reconsideration or appeal. Rule 9.10. Perpetuation of testimony before the arbitral tribunal is constituted. At anytime before arbitration is commenced or before the arbitral tribunal is constituted, any person who desires to perpetuate his testimony or that of another person may do so in accordance with Rule 24 of the Rules of Court. Rule 9.11. Consequence of disobedience. - The court may impose the appropriate sanction on any person who disobeys its order to testify when required or perform any act required of him. RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS Rule 10.1. Who may request confidentiality. - A party, counsel or witness who disclosed or who was compelled to disclose information relative to the subject of ADR under circumstances that would create a reasonable expectation, on behalf of the source, that the information shall be kept confidential has the right to prevent such information from being further disclosed without the express written consent of the source or the party who made the disclosure.

Rule 10.2. When request made. - A party may request a protective order at anytime there is a need to enforce the confidentiality of the information obtained, or to be obtained, in ADR proceedings. Rule 10.3. Venue. - A petition for a protective order may be filed with the Regional Trial Court where that order would be implemented. If there is a pending court proceeding in which the information obtained in an ADR proceeding is required to be divulged or is being divulged, the party seeking to enforce the confidentiality of the information may file a motion with the court where the proceedings are pending to enjoin the confidential information from being divulged or to suppress confidential information. Rule 10.4. Grounds. - A protective order may be granted only if it is shown that the applicant would be materially prejudiced by an unauthorized disclosure of the information obtained, or to be obtained, during an ADR proceeding. Rule 10.5. Contents of the motion or petition. - The petition or motion must state the following: a. That the information sought to be protected was obtained, or would be obtained, during an ADR proceeding; b. The applicant would be materially prejudiced by the disclosure of that information; c. The person or persons who are being asked to divulge the confidential information participated in an ADR proceedings; and d. The time, date and place when the ADR proceedings took place. Apart from the other submissions, the movant must set the motion for hearing and contain a notice of hearing in accordance with Rule 15 of the Rules of Court. Rule 10.6. Notice. - Notice of a request for a protective order made through a motion shall be made to the opposing parties in accordance with Rule 15 of the Rules of Court. Rule 10.7. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment may be accompanied by written proof that (a) the information is not confidential, (b) the information was not obtained during an ADR proceeding, (c) there was a waiver of confidentiality, or (d) the petitioner/movant is precluded from asserting confidentiality.

Rule 10.8. Court action. - If the court finds the petition or motion meritorious, it shall issue an order enjoining a person or persons from divulging confidential information. In resolving the petition or motion, the courts shall be guided by the following principles applicable to all ADR proceedings: Confidential information shall not be subject to discovery and shall be inadmissible in any adversarial proceeding, whether judicial or quasi judicial. However, evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its use therein. For mediation proceedings, the court shall be further guided by the following principles: a. Information obtained through mediation shall be privileged and confidential. b. A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a mediation communication. c. In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during the mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties: (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer; clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/ her profession. d. The protection of the ADR Laws shall continue to apply even if a mediator is found to have failed to act impartially. e. A mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney fees and related expenses. Rule 10.9. Relief against court action. - The order enjoining a person or persons from divulging confidential information shall be immediately executory and may not be enjoined while the order is being questioned with the appellate courts. If the court declines to enjoin a person or persons from divulging confidential information, the petitioner may file a motion for reconsideration or appeal.

Rule 10.10. Consequence of disobedience. - Any person who disobeys the order of the court to cease from divulging confidential information shall be imposed the proper sanction by the court. RULE 11: CONFIRMATION, CORRECTION OR VACATION OF AWARD IN DOMESTIC ARBITRATION Rule 11.1. Who may request confirmation, correction or vacation. - Any party to a domestic arbitration may petition the court to confirm, correct or vacate a domestic arbitral award. Rule 11.2. When to request confirmation, correction/modification or vacation. (A) Confirmation. - At any time after the lapse of thirty (30) days from receipt by the petitioner of the arbitral award, he may petition the court to confirm that award. (B) Correction/Modification. - Not later than thirty (30) days from receipt of the arbitral award, a party may petition the court to correct/modify that award. (C) Vacation. - Not later than thirty (30) days from receipt of the arbitral award, a party may petition the court to vacate that award. (D) A petition to vacate the arbitral award may be filed, in opposition to a petition to confirm the arbitral award, not later than thirty (30) days from receipt of the award by the petitioner. A petition to vacate the arbitral award filed beyond the reglementary period shall be dismissed. (E) A petition to confirm the arbitral award may be filed, in opposition to a petition to vacate the arbitral award, at any time after the petition to vacate such arbitral award is filed. The dismissal of the petition to vacate the arbitral award for having been filed beyond the reglementary period shall not result in the dismissal of the petition for the confirmation of such arbitral award. (F) The filing of a petition to confirm an arbitral award shall not authorize the filing of a belated petition to vacate or set aside such award in opposition thereto. (G) A petition to correct an arbitral award may be included as part of a petition to confirm the arbitral award or as a petition to confirm that award. Rule 11.3. Venue. - The petition for confirmation, correction/modification or vacation of a domestic arbitral award may be filed with Regional Trial Court having jurisdiction over the place in which one of the parties is doing business, where any of the parties reside or where arbitration proceedings were conducted.

Rule 11.4. Grounds. - (A) To vacate an arbitral award. - The arbitral award may be vacated on the following grounds: a. The arbitral award was procured through corruption, fraud or other undue means; b. There was evident partiality or corruption in the arbitral tribunal or any of its members; c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy; d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; or e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter submitted to them was not made. The award may also be vacated on any or all of the following grounds: a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or b. A party to arbitration is a minor or a person judicially declared to be incompetent. The petition to vacate an arbitral award on the ground that the party to arbitration is a minor or a person judicially declared to be incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court. In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above. (B) To correct/modify an arbitral award. - The Court may correct/modify or order the arbitral tribunal to correct/modify the arbitral award in the following cases:

a. Where there was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award; b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or d. Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioners report, the defect could have been amended or disregarded by the Court. Rule 11.5. Form of petition. - An application to vacate an arbitral award shall be in the form of a petition to vacate or as a petition to vacate in opposition to a petition to confirm the same award. An application to correct/modify an arbitral award may be included in a petition to confirm an arbitral award or in a petition to vacate in opposition to confirm the same award. When a petition to confirm an arbitral award is pending before a court, the party seeking to vacate or correct/modify said award may only apply for those reliefs through a petition to vacate or correct/modify the award in opposition to the petition to confirm the award provided that such petition to vacate or correct/modify is filed within thirty (30) days from his receipt of the award. A petition to vacate or correct/modify an arbitral award filed in another court or in a separate case before the same court shall be dismissed, upon appropriate motion, as a violation of the rule against forum-shopping. When a petition to vacate or correct/modify an arbitral award is pending before a court, the party seeking to confirm said award may only apply for that relief through a petition to confirm the same award in opposition to the petition to vacate or correct/modify the award. A petition to confirm or correct/modify an arbitral award filed as separate proceeding in another court or in a different case before the same court shall be dismissed, upon appropriate motion, as a violation of the rule against forum shopping. As an alternative to the dismissal of a second petition for confirmation, vacation or correction/modification of an arbitral award filed in violation of the non-forum shopping rule, the court or courts concerned may allow the consolidation of the two proceedings in one court and in one case. Where the petition to confirm the award and petition to vacate or correct/modify were simultaneously filed by the parties in the same court or in

different courts in the Philippines, upon motion of either party, the court may order the consolidation of the two cases before either court. In all instances, the petition must be verified by a person who has knowledge of the jurisdictional facts. Rule 11.6. Contents of petition. - The petition must state the following: a. The addresses of the parties and any change thereof; b. The jurisdictional issues raised by a party during arbitration proceedings; c. The grounds relied upon by the parties in seeking the vacation of the arbitral award whether the petition is a petition for the vacation or setting aside of the arbitral award or a petition in opposition to a petition to confirm the award; and d. A statement of the date of receipt of the arbitral award and the circumstances under which it was received by the petitioner. Apart from other submissions, the petitioner must attach to the petition the following: a. An authentic copy of the arbitration agreement; b. An authentic copy of the arbitral award; c. A certification against forum shopping executed by the applicant in accordance with Section 5 of Rule 7 of the Rules of Court; and d. An authentic copy or authentic copies of the appointment of an arbitral tribunal. Rule 11.7. Notice. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the Court shall cause notice and a copy of the petition to be delivered to the respondent allowing him to file a comment or opposition thereto within fifteen (15) days from receipt of the petition. In lieu of an opposition, the respondent may file a petition in opposition to the petition. The petitioner may within fifteen (15) days from receipt of the petition in opposition thereto file a reply. Rule 11.8. Hearing. - If the Court finds from the petition or petition in opposition thereto that there are issues of fact, it shall require the parties,

within a period of not more than fifteen (15) days from receipt of the order, to simultaneously submit the affidavits of all of their witnesses and reply affidavits within ten (10) days from receipt of the affidavits to be replied to. There shall be attached to the affidavits or reply affidavits documents relied upon in support of the statements of fact in such affidavits or reply affidavits. If the petition or the petition in opposition thereto is one for vacation of an arbitral award, the interested party in arbitration may oppose the petition or the petition in opposition thereto for the reason that the grounds cited in the petition or the petition in opposition thereto, assuming them to be true, do not affect the merits of the case and may be cured or remedied. Moreover, the interested party may request the court to suspend the proceedings for vacation for a period of time and to direct the arbitral tribunal to reopen and conduct a new hearing and take such other action as will eliminate the grounds for vacation of the award. The opposition shall be supported by a brief of legal arguments to show the existence of a sufficient legal basis for the opposition. If the ground of the petition to vacate an arbitral award is that the arbitration agreement did not exist, is invalid or otherwise unenforceable, and an earlier petition for judicial relief under Rule 3 had been filed, a copy of such petition and of the decision or final order of the court shall be attached thereto. But if the ground was raised before the arbitral tribunal in a motion to dismiss filed not later than the submission of its answer, and the arbitral tribunal ruled in favor of its own jurisdiction as a preliminary question which was appealed by a party to the Regional Trial Court, a copy of the order, ruling or preliminary award or decision of the arbitral tribunal, the appeal therefrom to the Court and the order or decision of the Court shall all be attached to the petition. If the ground of the petition is that the petitioner is an infant or a person judicially declared to be incompetent, there shall be attached to the petition certified copies of documents showing such fact. In addition, the petitioner shall show that even if the submission or arbitration agreement was entered into by a guardian or guardian ad litem, the latter was not authorized by a competent court to sign such the submission or arbitration agreement. If on the basis of the petition, the opposition, the affidavits and reply affidavits of the parties, the court finds that there is a need to conduct an oral hearing, the court shall set the case for hearing. This case shall have preference over other cases before the court, except criminal cases. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately be subject to cross-examination thereon. The Court shall have full control over the proceedings in order to ensure that the case is heard without undue delay. Rule 11.9. Court action. - Unless a ground to vacate an arbitral award under Rule 11.5 above is fully established, the court shall confirm the award.

An arbitral award shall enjoy the presumption that it was made and released in due course of arbitration and is subject to confirmation by the court In resolving the petition or petition in opposition thereto in accordance with these Special ADR Rules, the court shall either confirm or vacate the arbitral award. The court shall not disturb the arbitral tribunals determination of facts and/or interpretation of law. In a petition to vacate an award or in petition to vacate an award in opposition to a petition to confirm the award, the petitioner may simultaneously apply with the Court to refer the case back to the same arbitral tribunal for the purpose of making a new or revised award or to direct a new hearing, or in the appropriate case, order the new hearing before a new arbitral tribunal, the members of which shall be chosen in the manner provided in the arbitration agreement or submission, or the law. In the latter case, any provision limiting the time in which the arbitral tribunal may make a decision shall be deemed applicable to the new arbitral tribunal. In referring the case back to the arbitral tribunal or to a new arbitral tribunal pursuant to Rule 24 of Republic Act No. 876, the court may not direct it to revise its award in a particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the independence of an arbitral tribunal in the making of a final award. RULE 12: RECOGNITION AND ENFORCEMENT OR SETTING ASIDE OF AN INTERNATIONALCOMMERCIAL ARBITRATION AWARD Rule 12.1. Who may request recognition and enforcement or setting aside. - Any party to an international commercial arbitration in the Philippines may petition the proper court to recognize and enforce or set aside an arbitral award. Rule 12.2. When to file petition. - (A) Petition to recognize and enforce. - The petition for enforcement and recognition of an arbitral award may be filed anytime from receipt of the award. If, however, a timely petition to set aside an arbitral award is filed, the opposing party must file therein and in opposition thereto the petition for recognition and enforcement of the same award within the period for filing an opposition. (B) Petition to set aside. - The petition to set aside an arbitral award may only be filed within three (3) months from the time the petitioner receives a copy thereof. If a timely request is made with the arbitral tribunal for correction, interpretation or additional award, the three (3) month period shall be counted from the time the petitioner receives the resolution by the arbitral tribunal of that request.

A petition to set aside can no longer be filed after the lapse of the three (3) month period. The dismissal of a petition to set aside an arbitral award for being time-barred shall not automatically result in the approval of the petition filed therein and in opposition thereto for recognition and enforcement of the same award. Failure to file a petition to set aside shall preclude a party from raising grounds to resist enforcement of the award. Rule 12.3. Venue. - A petition to recognize and enforce or set aside an arbitral award may, at the option of the petitioner, be filed with the Regional Trial Court: (a) where arbitration proceedings were conducted; (b) where any of the assets to be attached or levied upon is located; (c) where the act to be enjoined will be or is being performed; (d) where any of the parties to arbitration resides or has its place of business; or (e) in the National Capital Judicial Region. Rule 12.4. Grounds to set aside or resist enforcement. - The court may set aside or refuse the enforcement of the arbitral award only if: a. The party making the application furnishes proof that: (i). A party to the arbitration agreement was under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under Philippine law; or (ii). The party making the application to set aside or resist enforcement was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii). The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside or only that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of Philippine law from which the parties cannot derogate, or, failing such agreement, was not in accordance with Philippine law; b. The court finds that:

(i). The subject-matter of the dispute is not capable of settlement by arbitration under the law of the Philippines; or (ii). The recognition or enforcement of the award would be contrary to public policy. In deciding the petition, the Court shall disregard any other ground to set aside or enforce the arbitral award other than those enumerated above. The petition to set-aside or a pleading resisting the enforcement of an arbitral award on the ground that a party was a minor or an incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court. Rule 12.5. Exclusive recourse against arbitral award. - Recourse to a court against an arbitral award shall be made only through a petition to set aside the arbitral award and on grounds prescribed by the law that governs international commercial arbitration. Any other recourse from the arbitral award, such as by appeal or petition for review or petition for certiorari or otherwise, shall be dismissed by the court. Rule 12.6. Form. - The application to recognize and enforce or set aside an arbitral award, whether made through a petition to recognize and enforce or to set aside or as a petition to set aside the award in opposition thereto, or through a petition to set aside or petition to recognize and enforce in opposition thereto, shall be verified by a person who has personal knowledge of the facts stated therein. When a petition to recognize and enforce an arbitral award is pending, the application to set it aside, if not yet time-barred, shall be made through a petition to set aside the same award in the same proceedings. When a timely petition to set aside an arbitral award is filed, the opposing party may file a petition for recognition and enforcement of the same award in opposition thereto. Rule 12.7. Contents of petition. - (A) Petition to recognize and enforce. - The petition to recognize and enforce or petition to set aside in opposition thereto, or petition to set aside or petition to recognize and enforce in opposition thereto, shall state the following: a. The addresses of record, or any change thereof, of the parties to arbitration;

b. A statement that the arbitration agreement or submission exists; c. The names of the arbitrators and proof of their appointment; d. A statement that an arbitral award was issued and when the petitioner received it; and e. The relief sought. Apart from other submissions, the petitioner shall attach to the petition the following: a. An authentic copy of the arbitration agreement; b. An authentic copy of the arbitral award; c. A verification and certification against forum shopping executed by the applicant in accordance with Sections 4 and 5 of Rule 7 of the Rules of Court; and d. An authentic copy or authentic copies of the appointment of an arbitral tribunal. (B) Petition to set aside. - The petition to set aside or petition to set aside in opposition to a petition to recognize and enforce an arbitral award in international commercial arbitration shall have the same contents as a petition to recognize and enforce or petition to recognize and enforce in opposition to a petition to set aside an arbitral award. In addition, the said petitions should state the grounds relied upon to set it aside. Further, if the ground of the petition to set aside is that the petitioner is a minor or found incompetent by a court, there shall be attached to the petition certified copies of documents showing such fact. In addition, the petitioner shall show that even if the submission or arbitration agreement was entered into by a guardian or guardian ad litem, the latter was not authorized by a competent court to sign such the submission or arbitration agreement. In either case, if another court was previously requested to resolve and/or has resolved, on appeal, the arbitral tribunals preliminary determination in favor of its own jurisdiction, the petitioner shall apprise the court before which the petition to recognize and enforce or set aside is pending of the status of the appeal or its resolution. Rule 12.8. Notice. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the court shall cause notice and a copy of the petition to be delivered to the respondent directing him to file an

opposition thereto within fifteen (15) days from receipt of the petition. In lieu of an opposition, the respondent may file a petition to set aside in opposition to a petition to recognize and enforce, or a petition to recognize and enforce in opposition to a petition to set aside. The petitioner may within fifteen (15) days from receipt of the petition to set aside in opposition to a petition to recognize and enforce, or from receipt of the petition to recognize and enforce in opposition to a petition to set aside, file a reply. Rule 12.9. Submission of documents. - If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than fifteen (15) days from receipt of the order, sufficiently discussing the legal issues and the legal basis for the relief prayed for by each of them. If the court finds from the petition or petition in opposition thereto that there are issues of fact relating to the ground(s) relied upon for the court to set aside, it shall require the parties within a period of not more than fifteen (15) days from receipt of the order simultaneously to submit the affidavits of all of their witnesses and reply affidavits within ten (10) days from receipt of the affidavits to be replied to. There shall be attached to the affidavits or reply affidavits, all documents relied upon in support of the statements of fact in such affidavits or reply affidavits. Rule 12.10. Hearing. - If on the basis of the petition, the opposition, the affidavits and reply affidavits of the parties, the court finds that there is a need to conduct an oral hearing, the court shall set the case for hearing. This case shall have preference over other cases before the court, except criminal cases. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately be subject to cross-examination thereon. The court shall have full control over the proceedings in order to ensure that the case is heard without undue delay. Rule 12.11. Suspension of proceedings to set aside. - The court when asked to set aside an arbitral award may, where appropriate and upon request by a party, suspend the proceedings for a period of time determined by it to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunals opinion will eliminate the grounds for setting aside. The court, in referring the case back to the arbitral tribunal may not direct it to revise its award in a particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the independence of an arbitral tribunal in the making of a final award. The court when asked to set aside an arbitral award may also, when the preliminary ruling of an arbitral tribunal affirming its jurisdiction to act on the

matter before it had been appealed by the party aggrieved by such preliminary ruling to the court, suspend the proceedings to set aside to await the ruling of the court on such pending appeal or, in the alternative, consolidate the proceedings to set aside with the earlier appeal. Rule 12.12. Presumption in favor of confirmation. - It is presumed that an arbitral award was made and released in due course and is subject to enforcement by the court, unless the adverse party is able to establish a ground for setting aside or not enforcing an arbitral award. Rule 12.13. Judgment of the court. - Unless a ground to set aside an arbitral award under Rule 12.4 above is fully established, the court shall dismiss the petition. If, in the same proceedings, there is a petition to recognize and enforce the arbitral award filed in opposition to the petition to set aside, the court shall recognize and enforce the award. In resolving the petition or petition in opposition thereto in accordance with the Special ADR Rules, the court shall either set aside or enforce the arbitral award. The court shall not disturb the arbitral tribunals determination of facts and/or interpretation of law. Rule 12.14. Costs. - Unless otherwise agreed upon by the parties in writing, at the time the case is submitted to the court for decision, the party praying for recognition and enforcement or setting aside of an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for such recognition and enforcement or setting aside. The costs shall include the attorneys fees the party has paid or is committed to pay to his counsel of record. The prevailing party shall be entitled to an award of costs, which shall include reasonable attorneys fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorneys fees. RULE 13: RECOGNITION AND ENFORCEMENT OF A FOREIGN ARBITRAL AWARD Rule 13.1. Who may request recognition and enforcement. - Any party to a foreign arbitration may petition the court to recognize and enforce a foreign arbitral award. Rule 13.2. When to petition. - At any time after receipt of a foreign arbitral award, any party to arbitration may petition the proper Regional Trial Court to recognize and enforce such award.

Rule 13.3. Venue. - The petition to recognize and enforce a foreign arbitral award shall be filed, at the option of the petitioner, with the Regional Trial Court (a) where the assets to be attached or levied upon is located, (b) where the act to be enjoined is being performed, (c) in the principal place of business in the Philippines of any of the parties, (d) if any of the parties is an individual, where any of those individuals resides, or (e) in the National Capital Judicial Region. Rule 13.4. Governing law and grounds to refuse recognition and enforcement. The recognition and enforcement of a foreign arbitral award shall be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") and this Rule. The court may, upon grounds of comity and reciprocity, recognize and enforce a foreign arbitral award made in a country that is not a signatory to the New York Convention as if it were a Convention Award. A Philippine court shall not set aside a foreign arbitral award but may refuse it recognition and enforcement on any or all of the following grounds: a. The party making the application to refuse recognition and enforcement of the award furnishes proof that: (i). A party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made; or (ii). The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iii). The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where arbitration took place; or

(v). The award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which that award was made; or b. The court finds that: (i). The subject-matter of the dispute is not capable of settlement or resolution by arbitration under Philippine law; or (ii). The recognition or enforcement of the award would be contrary to public policy. The court shall disregard any ground for opposing the recognition and enforcement of a foreign arbitral award other than those enumerated above. Rule 13.5. Contents of petition. - The petition shall state the following: a. The addresses of the parties to arbitration; b. In the absence of any indication in the award, the country where the arbitral award was made and whether such country is a signatory to the New York Convention; and c. The relief sought. Apart from other submissions, the petition shall have attached to it the following: a. An authentic copy of the arbitration agreement; and b. An authentic copy of the arbitral award. If the foreign arbitral award or agreement to arbitrate or submission is not made in English, the petitioner shall also attach to the petition a translation of these documents into English. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent. Rule 13.6. Notice and opposition. - Upon finding that the petition filed under this Rule is sufficient both in form and in substance, the court shall cause notice and a copy of the petition to be delivered to the respondent allowing him to file an opposition thereto within thirty (30) days from receipt of the notice and petition. Rule 13.7. Opposition. - The opposition shall be verified by a person who has personal knowledge of the facts stated therein.

Rule 13.8. Submissions. - If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than thirty (30) days from receipt of the order, sufficiently discussing the legal issues and the legal bases for the relief prayed for by each other. If, from a review of the petition or opposition, there are issues of fact relating to the ground/s relied upon for the court to refuse enforcement, the court shall, motu proprio or upon request of any party, require the parties to simultaneously submit the affidavits of all of their witnesses within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the order. The court may, upon the request of any party, allow the submission of reply affidavits within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the order granting said request. There shall be attached to the affidavits or reply affidavits all documents relied upon in support of the statements of fact in such affidavits or reply affidavits. Rule 13.9. Hearing. - The court shall set the case for hearing if on the basis of the foregoing submissions there is a need to do so. The court shall give due priority to hearings on petitions under this Rule. During the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall immediately be subject to cross-examination. The court shall have full control over the proceedings in order to ensure that the case is heard without undue delay. Rule 13.10. Adjournment/deferment of decision on enforcement of award. - The court before which a petition to recognize and enforce a foreign arbitral award is pending, may adjourn or defer rendering a decision thereon if, in the meantime, an application for the setting aside or suspension of the award has been made with a competent authority in the country where the award was made. Upon application of the petitioner, the court may also require the other party to give suitable security. Rule 13.11. Court action. - It is presumed that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court. The court shall recognize and enforce a foreign arbitral award unless a ground to refuse recognition or enforcement of the foreign arbitral award under this rule is fully established. The decision of the court recognizing and enforcing a foreign arbitral award is immediately executory. In resolving the petition for recognition and enforcement of a foreign arbitral award in accordance with these Special ADR Rules, the court shall either [a]

recognize and/or enforce or [b] refuse to recognize and enforce the arbitral award. The court shall not disturb the arbitral tribunals determination of facts and/or interpretation of law. Rule 13.12. Recognition and enforcement of non-convention award. - The court shall, only upon grounds provided by these Special ADR Rules, recognize and enforce a foreign arbitral award made in a country not a signatory to the New York Convention when such country extends comity and reciprocity to awards made in the Philippines. If that country does not extend comity and reciprocity to awards made in the Philippines, the court may nevertheless treat such award as a foreign judgment enforceable as such under Rule 39, Section 48, of the Rules of Court. PART PROVISIONS SPECIFIC TO MEDIATION RULE 14: GENERAL PROVISIONS Rule 14.1. Application of the rules on arbitration. - Whenever applicable and appropriate, the pertinent rules on arbitration shall be applied in proceedings before the court relative to a dispute subject to mediation. RULE 15: DEPOSIT AND ENFORCEMENT OF MEDIATED SETTLEMENT AGREEMENTS Rule 15.1. Who makes a deposit. - Any party to a mediation that is not courtannexed may deposit with the court the written settlement agreement, which resulted from that mediation. Rule 15.2. When deposit is made. - At any time after an agreement is reached, the written settlement agreement may be deposited. Rule 15.3. Venue. - The written settlement agreement may be jointly deposited by the parties or deposited by one party with prior notice to the other party/ies with the Clerk of Court of the Regional Trial Court (a) where the principal place of business in the Philippines of any of the parties is located; (b) if any of the parties is an individual, where any of those individuals resides; or (c) in the National Capital Judicial Region. Rule 15.4. Registry Book. - The Clerk of Court of each Regional Trial Court shall keep a Registry Book that shall chronologically list or enroll all the mediated settlement agreements/settlement awards that are deposited with the court as well as the names and address of the parties thereto and the date of enrollment and shall issue a Certificate of Deposit to the party that made the deposit. III

Rule 15.5. Enforcement of mediated settlement agreement. - Any of the parties to a mediated settlement agreement, which was deposited with the Clerk of Court of the Regional Trial Court, may, upon breach thereof, file a verified petition with the same court to enforce said agreement. Rule 15.6. Contents of petition. - The verified petition shall: a. Name and designate, as petitioner or respondent, all parties to the mediated settlement agreement and those who may be affected by it; b. State the following: (i). The addresses of the petitioner and respondents; and (ii). The ultimate facts that would show that the adverse party has defaulted to perform its obligation under said agreement; and c. Have attached to it the following: (i). An authentic copy of the mediated settlement agreement; and (ii). Certificate of Deposit showing that the mediated settlement agreement was deposited with the Clerk of Court. Rule 15.7. Opposition. - The adverse party may file an opposition, within fifteen (15) days from receipt of notice or service of the petition, by submitting written proof of compliance with the mediated settlement agreement or such other affirmative or negative defenses it may have. Rule 15.8. Court action. - After a summary hearing, if the court finds that the agreement is a valid mediated settlement agreement, that there is no merit in any of the affirmative or negative defenses raised, and the respondent has breached that agreement, in whole or in part, the court shall order the enforcement thereof; otherwise, it shall dismiss the petition. PART PROVISIONS SPECIFIC TO CONSTRUCTION ARBITRATION RULE 16: GENERAL PROVISIONS Rule 16.1. Application of the rules on arbitration. - Whenever applicable and appropriate, the rules on arbitration shall be applied in proceedings before the court relative to a dispute subject to construction arbitration. RULE 17: REFERRAL TO CIAC IV

Rule 17.1. Dismissal of action. - A Regional Trial Court before which a construction dispute is filed shall, upon becoming aware that the parties have entered into an arbitration agreement, motu proprio or upon motion made not later than the pre-trial, dismiss the case and refer the parties to arbitration to be conducted by the Construction Industry Arbitration Commission (CIAC), unless all parties to arbitration, assisted by their respective counsel, submit to the court a written agreement making the court, rather than the CIAC, the body that would exclusively resolve the dispute. Rule 17.2. Form and contents of motion. - The request for dismissal of the civil action and referral to arbitration shall be through a verified motion that shall (a) contain a statement showing that the dispute is a construction dispute; and (b) be accompanied by proof of the existence of the arbitration agreement. If the arbitration agreement or other document evidencing the existence of that agreement is already part of the record, those documents need not be submitted to the court provided that the movant has cited in the motion particular references to the records where those documents may be found. The motion shall also contain a notice of hearing addressed to all parties and shall specify the date and time when the motion will be heard, which must not be later than fifteen (15) days after the filing of the motion. The movant shall ensure receipt by all parties of the motion at least three days before the date of the hearing. Rule 17.3. Opposition. - Upon receipt of the motion to refer the dispute to arbitration by CIAC, the other party may file an opposition to the motion on or before the day such motion is to be heard. The opposition shall clearly set forth the reasons why the court should not dismiss the case. Rule 17.4. Hearing. - The court shall hear the motion only once and for the purpose of clarifying relevant factual and legal issues. Rule 17.5. Court action. - If the other parties fail to file their opposition on or before the day of the hearing, the court shall motu proprio resolve the motion only on the basis of the facts alleged in the motion. After hearing, the court shall dismiss the civil action and refer the parties to arbitration if it finds, based on the pleadings and supporting documents submitted by the parties, that there is a valid and enforceable arbitration agreement involving a construction dispute. Otherwise, the court shall proceed to hear the case. All doubts shall be resolved in favor of the existence of a construction dispute and the arbitration agreement.

Rule 17.6. Referral immediately executory. - An order dismissing the case and referring the dispute to arbitration by CIAC shall be immediately executory. Rule 17.7. Multiple actions and parties. - The court shall not decline to dismiss the civil action and make a referral to arbitration by CIAC for any of the following reasons: a. Not all of the disputes subject of the civil action may be referred to arbitration; b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits; c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the Court rather than in arbitration; d. Referral to arbitration does not appear to be the most prudent action; or e. Dismissal of the civil action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement. The court may, however, issue an order directing the inclusion in arbitration of those parties who are bound by the arbitration agreement directly or by reference thereto pursuant to Section 34 of Republic Act No. 9285. Furthermore, the court shall issue an order directing the case to proceed with respect to the parties not bound by the arbitration agreement. Rule 17.8. Referral - If the parties manifest that they have agreed to submit all or part of their dispute pending with the court to arbitration by CIAC, the court shall refer them to CIAC for arbitration. PART PROVISIONS SPECIFIC TO OTHER FORMS OF ADR RULE 18: GENERAL PROVISIONS Rule 18.1. Applicability of rules to other forms of ADR. - This rule governs the procedure for matters brought before the court involving the following forms of ADR: a. Early neutral evaluation; b. Neutral evaluation; V

c. Mini-trial; d. Mediation-arbitration; e. A combination thereof; or f. Any other ADR form. Rule 18.2. Applicability of the rules on mediation. - If the other ADR form/process is more akin to mediation (i.e., the neutral third party merely assists the parties in reaching a voluntary agreement), the herein rules on mediation shall apply. Rule 18.3. Applicability of rules on arbitration.-If the other ADR form/process is more akin to arbitration (i.e., the neutral third party has the power to make a binding resolution of the dispute), the herein rules on arbitration shall apply. Rule 18.4. Referral. - If a dispute is already before a court, either party may before and during pre-trial, file a motion for the court to refer the parties to other ADR forms/processes. At any time during court proceedings, even after pre-trial, the parties may jointly move for suspension of the action pursuant to Article 2030 of the Civil Code of the Philippines where the possibility of compromise is shown. Rule 18.5. Submission of settlement agreement. - Either party may submit to the court, before which the case is pending, any settlement agreement following a neutral or an early neutral evaluation, mini-trial or mediation-arbitration. PART MOTION FOR RECONSIDERATION, APPEAL AND CERTIORARI RULE 19: MOTION FOR RECONSIDERATION, APPEAL AND CERTIORARI A. MOTION FOR RECONSIDERATION Rule 19.1. Motion for reconsideration, when allowed. - A party may ask the Regional Trial to reconsider its ruling on the following: a. That the arbitration agreement is inexistent, invalid or unenforceable pursuant to Rule 3.10 (B); b. Upholding or reversing the arbitral tribunals jurisdiction pursuant to Rule 3.19; c. Denying a request to refer the parties to arbitration; VI

d. Granting or denying a party an interim measure of protection; e. Denying a petition for the appointment of an arbitrator; f. Refusing to grant assistance in taking evidence; g. Enjoining or refusing to enjoin a person from divulging confidential information; h. Confirming, vacating or correcting a domestic arbitral award; i. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal; j. Setting aside an international commercial arbitral award; k. Dismissing the petition to set aside an international commercial arbitral award, even if the court does not recognize and/or enforce the same; l. Recognizing and/or enforcing, or dismissing a petition to recognize and/or enforce an international commercial arbitral award; m. Declining a request for assistance in taking evidence; n. Adjourning or deferring a ruling on a petition to set aside, recognize and/or enforce an international commercial arbitral award; o. Recognizing and/or enforcing a foreign arbitral award, or refusing recognition and/or enforcement of the same; and p. Granting or dismissing a petition to enforce a deposited mediated settlement agreement. No motion for reconsideration shall be allowed from the following rulings of the Regional Trial Court: a. A prima facie determination upholding the existence, validity or enforceability of an arbitration agreement pursuant to Rule 3.1 (A); b. An order referring the dispute to arbitration; c. An order appointing an arbitrator; d. Any ruling on the challenge to the appointment of an arbitrator;

e. Any order resolving the issue of the termination of the mandate of an arbitrator; and f. An order granting assistance in taking evidence. Rule 19.2. When to move for reconsideration. - A motion for reconsideration may be filed with the Regional Trial Court within a non-extendible period of fifteen (15) days from receipt of the questioned ruling or order. Rule 19.3. Contents and notice. - The motion shall be made in writing stating the ground or grounds therefor and shall be filed with the court and served upon the other party or parties. Rule 19.4. Opposition or comment. - Upon receipt of the motion for reconsideration, the other party or parties shall have a non-extendible period of fifteen (15) days to file his opposition or comment. Rule 19.5. Resolution of motion. - A motion for reconsideration shall be resolved within thirty (30) days from receipt of the opposition or comment or upon the expiration of the period to file such opposition or comment. Rule 19.6. No second motion for reconsideration. - No party shall be allowed a second motion for reconsideration. B. GENERAL PROVISIONS ON APPEAL AND CERTIORARI Rule 19.7. No appeal or certiorari on the merits of an arbitral award. - An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award. Rule 19.8. Subject matter and governing rules. - The remedy of an appeal through a petition for review or the remedy of a special civil action of certiorari from a decision of the Regional Trial Court made under the Special ADR Rules shall be allowed in the instances, and instituted only in the manner, provided under this Rule. Rule 19.9. Prohibited alternative remedies. - Where the remedies of appeal and certiorari are specifically made available to a party under the Special ADR Rules, recourse to one remedy shall preclude recourse to the other. Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general rule, the court can only vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from any of the infirmities or grounds for vacating an arbitral award under Section 24 of Republic Act No.

876 or under Rule 34 of the Model Law in a domestic arbitration, or for setting aside an award in an international arbitration under Article 34 of the Model Law, or for such other grounds provided under these Special Rules. If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international arbitration on any ground other than those provided in the Special ADR Rules, the court shall entertain such ground for the setting aside or non-recognition of the arbitral award only if the same amounts to a violation of public policy. The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground that the arbitral tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute its judgment for that of the arbitral tribunal. Rule 19.11. Rule on judicial review of foreign arbitral award. - The court can deny recognition and enforcement of a foreign arbitral award only upon the grounds provided in Article V of the New York Convention, but shall have no power to vacate or set aside a foreign arbitral award. C. APPEALS TO THE COURT OF APPEALS Rule 19.12. Appeal to the Court of Appeals. - An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following final orders of the Regional Trial Court: a. Granting or denying an interim measure of protection; b. Denying a petition for appointment of an arbitrator; c. Denying a petition for assistance in taking evidence; d. Enjoining or refusing to enjoin a person from divulging confidential information; e. Confirming, vacating or correcting/modifying a domestic arbitral award; f. Setting aside an international commercial arbitration award; g. Dismissing the petition to set aside an international commercial arbitration award even if the court does not decide to recognize or enforce such award; h. Recognizing and/or enforcing an international commercial arbitration award;

i. Dismissing a petition to enforce arbitration award;

an international

commercial

j. Recognizing and/or enforcing a foreign arbitral award; k. Refusing recognition and/or enforcement of a foreign arbitral award; l. Granting or dismissing a petition to enforce a deposited mediated settlement agreement; and m. Reversing the ruling of the arbitral tribunal upholding its jurisdiction. Rule 19.13. Where to appeal. - An appeal under this Rule shall be taken to the Court of Appeals within the period and in the manner herein provided. Rule 19.14. When to appeal. - The petition for review shall be filed within fifteen (15) days from notice of the decision of the Regional Trial Court or the denial of the petitioners motion for reconsideration. Rule 19.15. How appeal taken. - Appeal shall be taken by filing a verified petition for review in seven (7) legible copies with the Court of Appeals, with proof of service of a copy thereof on the adverse party and on the Regional Trial Court. The original copy of the petition intended for the Court of Appeals shall be marked original by the petitioner. Upon the filing of the petition and unless otherwise prescribed by the Court of Appeals, the petitioner shall pay to the clerk of court of the Court of Appeals docketing fees and other lawful fees of P3,500.00 and deposit the sum of P500.00 for costs. Exemption from payment of docket and other lawful fees and the deposit for costs may be granted by the Court of Appeals upon a verified motion setting forth valid grounds therefor. If the Court of Appeals denies the motion, the petitioner shall pay the docketing and other lawful fees and deposit for costs within fifteen days from the notice of the denial. Rule 19.16. Contents of the Petition. - The petition for review shall (a) state the full names of the parties to the case, without impleading the court or agencies either as petitioners or respondent, (b) contain a concise statement of the facts and issues involved and the grounds relied upon for the review, (c) be accompanied by a clearly legible duplicate original or a certified true copy of the decision or resolution of the Regional Trial Court appealed from, together with certified true copies of such material portions of the record referred to therein and other supporting papers, and (d) contain a sworn certification against forum shopping as provided in the Rules of Court. The petition shall

state the specific material dates showing that it was filed within the period fixed herein. Rule 19.17. Effect of failure to comply with requirements. - The court shall dismiss the petition if it fails to comply with the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, the contents and the documents, which should accompany the petition. Rule 19.18. Action on the petition. - The Court of Appeals may require the respondent to file a comment on the petition, not a motion to dismiss, within ten (10) days from notice, or dismiss the petition if it finds, upon consideration of the grounds alleged and the legal briefs submitted by the parties, that the petition does not appear to be prima facie meritorious. Rule 19.19. Contents of Comment. - The comment shall be filed within ten (10) days from notice in seven (7) legible copies and accompanied by clearly legible certified true copies of such material portions of the record referred to therein together with other supporting papers. The comment shall (a) point out insufficiencies or inaccuracies in petitioners statement of facts and issues, and (b) state the reasons why the petition should be denied or dismissed. A copy thereof shall be served on the petitioner, and proof of such service shall be filed with the Court of Appeals. Rule 19.20. Due course. - If upon the filing of a comment or such other pleading or documents as may be required or allowed by the Court of Appeals or upon the expiration of the period for the filing thereof, and on the basis of the petition or the records, the Court of Appeals finds prima facie that the Regional Trial Court has committed an error that would warrant reversal or modification of the judgment, final order, or resolution sought to be reviewed, it may give due course to the petition; otherwise, it shall dismiss the same. Rule 19.21. Transmittal of records. - Within fifteen (15) days from notice that the petition has been given due course, the Court of Appeals may require the court or agency concerned to transmit the original or a legible certified true copy of the entire record of the proceeding under review. The record to be transmitted may be abridged by agreement of all parties to the proceeding. The Court of Appeals may require or permit subsequent correction of or addition to the record. Rule 19.22. Effect of appeal. - The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the Court of Appeals directs otherwise upon such terms as it may deem just. Rule 19.23. Submission for decision. - If the petition is given due course, the Court of Appeals may set the case for oral argument or require the parties to

submit memoranda within a period of fifteen (15) days from notice. The case shall be deemed submitted for decision upon the filing of the last pleading or memorandum required by the Court of Appeals. The Court of Appeals shall render judgment within sixty (60) days from the time the case is submitted for decision. Rule 19.24. Subject of appeal restricted in certain instance. - If the decision of the Regional Trial Court refusing to recognize and/or enforce, vacating and/or setting aside an arbitral award is premised on a finding of fact, the Court of Appeals may inquire only into such fact to determine the existence or nonexistence of the specific ground under the arbitration laws of the Philippines relied upon by the Regional Trial Court to refuse to recognize and/or enforce, vacate and/or set aside an award. Any such inquiry into a question of fact shall not be resorted to for the purpose of substituting the courts judgment for that of the arbitral tribunal as regards the latters ruling on the merits of the controversy. Rule 19.25. Party appealing decision of court confirming arbitral award required to post bond. - The Court of Appeals shall within fifteen (15) days from receipt of the petition require the party appealing from the decision or a final order of the Regional Trial Court, either confirming or enforcing an arbitral award, or denying a petition to set aside or vacate the arbitral award to post a bond executed in favor of the prevailing party equal to the amount of the award. Failure of the petitioner to post such bond shall be a ground for the Court of Appeals to dismiss the petition. D. SPECIAL CIVIL ACTION FOR CERTIORARI Rule 19.26. Certiorari to the Court of Appeals. - When the Regional Trial Court, in making a ruling under the Special ADR Rules, has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law, a party may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial Court. A special civil action for certiorari may be filed against the following orders of the court. a. Holding that the arbitration agreement is inexistent, invalid or unenforceable; b. Reversing the arbitral tribunals preliminary determination upholding its jurisdiction;

c. Denying the request to refer the dispute to arbitration; d. Granting or refusing an interim relief; e. Denying a petition for the appointment of an arbitrator; f. Confirming, vacating or correcting a domestic arbitral award; g. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal; h. Allowing a party to enforce an international commercial arbitral award pending appeal; i. Adjourning or deferring a ruling on whether to set aside, recognize and or enforce an international commercial arbitral award; j. Allowing a party to enforce a foreign arbitral award pending appeal; and k. Denying a petition for assistance in taking evidence. Rule 19.27. Form. - The petition shall be accompanied by a certified true copy of the questioned judgment, order or resolution of the Regional Trial Court, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the Rules of Court. Upon the filing of the petition and unless otherwise prescribed by the Court of Appeals, the petitioner shall pay to the clerk of court of the Court of Appeals docketing fees and other lawful fees of P3,500.00 and deposit the sum of P500.00 for costs. Exemption from payment of docket and other lawful fees and the deposit for costs may be granted by the Court of Appeals upon a verified motion setting forth valid grounds therefor. If the Court of Appeals denies the motion, the petitioner shall pay the docketing and other lawful fees and deposit for costs within fifteen days from the notice of the denial. Rule 19.28. When to file petition. - The petition must be filed with the Court of Appeals within fifteen (15) days from notice of the judgment, order or resolution sought to be annulled or set aside. No extension of time to file the petition shall be allowed. Rule 19.29. Arbitral tribunal a nominal party in the petition. - The arbitral tribunal shall only be a nominal party in the petition for certiorari. As nominal party, the arbitral tribunal shall not be required to submit any pleadings or written submissions to the court. The arbitral tribunal or an arbitrator may,

however, submit such pleadings or written submissions if the same serves the interest of justice. In petitions relating to the recognition and enforcement of a foreign arbitral award, the arbitral tribunal shall not be included even as a nominal party. However, the tribunal may be notified of the proceedings and furnished with court processes. Rule 19.30. Court to dismiss petition. - The court shall dismiss the petition if it fails to comply with Rules 19.27 and 19.28 above, or upon consideration of the ground alleged and the legal briefs submitted by the parties, the petition does not appear to be prima facie meritorious. Rule 19.31. Order to comment. - If the petition is sufficient in form and substance to justify such process, the Court of Appeals shall immediately issue an order requiring the respondent or respondents to comment on the petition within a non-extendible period of fifteen (15) days from receipt of a copy thereof. Such order shall be served on the respondents in such manner as the court may direct, together with a copy of the petition and any annexes thereto. Rule 19.32. Arbitration may continue despite petition for certiorari. - A petition for certiorari to the court from the action of the appointing authority or the arbitral tribunal allowed under this Rule shall not prevent the arbitral tribunal from continuing the proceedings and rendering its award. Should the arbitral tribunal continue with the proceedings, the arbitral proceedings and any award rendered therein will be subject to the final outcome of the pending petition for certiorari. Rule 19.33. Prohibition against injunctions. - The Court of Appeals shall not, during the pendency of the proceedings before it, prohibit or enjoin the commencement of arbitration, the constitution of the arbitral tribunal, or the continuation of arbitration. Rule 19.34. Proceedings after comment is filed. - After the comment is filed, or the time for the filing thereof has expired, the court shall render judgment granting the relief prayed for or to which the petitioner is entitled, or denying the same, within a non-extendible period of fifteen (15) days. Rule 19.35. Service and enforcement of order or judgment. - A certified copy of the judgment rendered in accordance with the last preceding section shall be served upon the Regional Trial Court concerned in such manner as the Court of Appeals may direct, and disobedience thereto shall be punished as contempt. E. APPEAL BY CERTIORARI TO THE SUPREME COURT

Rule 19.36. Review discretionary. - A review by the Supreme Court is not a matter of right, but of sound judicial discretion, which will be granted only for serious and compelling reasons resulting in grave prejudice to the aggrieved party. The following, while neither controlling nor fully measuring the court's discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that will warrant the exercise of the Supreme Courts discretionary powers, when the Court of Appeals: a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR Rules in arriving at its decision resulting in substantial prejudice to the aggrieved party; b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered such final order or decision; c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in substantial prejudice to the aggrieved party; and d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction. The mere fact that the petitioner disagrees with the Court of Appeals determination of questions of fact, of law or both questions of fact and law, shall not warrant the exercise of the Supreme Courts discretionary power. The error imputed to the Court of Appeals must be grounded upon any of the above prescribed grounds for review or be closely analogous thereto. A mere general allegation that the Court of Appeals has committed serious and substantial error or that it has acted with grave abuse of discretion resulting in substantial prejudice to the petitioner without indicating with specificity the nature of such error or abuse of discretion and the serious prejudice suffered by the petitioner on account thereof, shall constitute sufficient ground for the Supreme Court to dismiss outright the petition. Rule 19.37. Filing of petition with Supreme Court. - A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals issued pursuant to these Special ADR Rules may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law, which must be distinctly set forth. Rule 19.38. Time for filing; extension. - The petition shall be filed within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for new trial or reconsideration filed in due time after notice of the judgment.

On motion duly filed and served, with full payment of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Supreme Court may for justifiable reasons grant an extension of thirty (30) days only within which to file the petition. Rule 19.39. Docket and other lawful fees; proof of service of petition. - Unless he has theretofore done so or unless the Supreme Court orders otherwise, the petitioner shall pay docket and other lawful fees to the clerk of court of the Supreme Court of P3,500.00 and deposit the amount of P500.00 for costs at the time of the filing of the petition. Proof of service of a copy thereof on the lower court concerned and on the adverse party shall be submitted together with the petition. Rule 19.40. Contents of petition. - The petition shall be filed in eighteen (18) copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full name of the appealing party as the petitioner and the adverse party as respondent, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received; (c) set forth concisely a statement of the matters involved, and the reasons or arguments relied on for the allowance of the petition; (d) be accompanied by a clearly legible duplicate original, or a certified true copy of the judgment or final order or resolution certified by the clerk of court of the court a quo and the requisite number of plain copies thereof, and such material portions of the record as would support the petition; and (e) contain a sworn certification against forum shopping. Rule 19.41. Dismissal or denial of petition. - The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof. The Supreme Court may on its own initiative deny the petition on the ground that the appeal is without merit, or is prosecuted manifestly for delay, or that the questions raised therein are too insubstantial to require consideration. Rule 19.42. Due course; elevation of records. - If the petition is given due course, the Supreme Court may require the elevation of the complete record of the case or specified parts thereof within fifteen (15) days from notice. PART FINAL PROVISIONS VII

RULE 20: FILING AND DEPOSIT FEES Rule 20.1. Filing fee in petitions or counter-petitions to confirm or enforce, vacate or set aside arbitral award or for the enforcement of a mediated settlement agreement. - The filing fee for filing a petition to confirm or enforce, vacate or set aside an arbitral award in a domestic arbitration or in an international commercial arbitration, or enforce a mediated settlement agreement shall be as follows: PhP 10,000.00 - if the award does not exceed PhP 1,000,000.00 PhP 20,000.00 - if the award does not exceed PhP 20,000,000.00 PhP 30,000.00 - if the award does not exceed PhP 50,000,000.00 PhP 40,000.00 - if the award does not exceed PhP 100,000,000.00 PhP 50,000.00 - if the award exceeds PhP 100,000,000.00 The minimal filing fee payable in "all other actions not involving property" shall be paid by the petitioner seeking to enforce foreign arbitral awards under the New York Convention in the Philippines. Rule 20.2. Filing fee for action to enforce as a counter-petition. - A petition to enforce an arbitral award in a domestic arbitration or in an international commercial arbitration submitted as a petition to enforce and/or recognize an award in opposition to a timely petition to vacate or set aside the arbitral award shall require the payment of the filing fees prescribed in Rule 20.1 above. Rule 20.3. Deposit fee for mediated settlement agreements. - Any party to a mediated settlement agreement who deposits it with the clerk of court shall pay a deposit fee of P500.00. Rule 20.4. Filing fee for other proceedings. - The filing fee for the filing of any other proceedings, including applications for interim relief, as authorized under these Special Rules not covered under any of the foregoing provisions, shall be P10,000.00. RULE 21: COSTS Rule 21.1. Costs. - The costs of the ADR proceedings shall be borne by the parties equally unless otherwise agreed upon or directed by the arbitrator or arbitral tribunal. Rule 21.2. On the dismissal of a petition against a ruling of the arbitral tribunal on a preliminary question upholding its jurisdiction. - If the Regional Trial Court

dismisses the petition against the ruling of the arbitral tribunal on a preliminary question upholding its jurisdiction, it shall also order the petitioner to pay the respondent all reasonable costs and expenses incurred in opposing the petition. "Costs" shall include reasonable attorneys fees. The court shall award costs upon application of the respondent after the petition is denied and the court finds, based on proof submitted by respondent, that the amount of costs incurred is reasonable. Rule 21.3. On recognition and enforcement of a foreign arbitral award. - At the time the case is submitted to the court for decision, the party praying for recognition and enforcement of a foreign arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings in the Philippines for such recognition and enforcement or settingaside. The costs shall include attorneys fees the party has paid or is committed to pay to his counsel of record. The prevailing party shall be entitled to an award of costs which shall include the reasonable attorneys fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorneys fees. Rule 21.4. Costs. - At the time the case is submitted to the court for decision, the party praying for confirmation or vacation of an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for confirmation or vacation of an arbitral award. The costs shall include the attorneys fees the party has paid or is committed to pay to his counsel of record. The prevailing party shall be entitled to an award of costs with respect to the proceedings before the court, which shall include the reasonable attorneys fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorneys fees. Rule 21.5. Bill of Costs. - Unless otherwise agreed upon by the parties in writing, at the time the case is submitted to the court for decision, the party praying for recognition and enforcement or for setting aside an arbitral award shall submit a statement under oath confirming the costs he has incurred only in the proceedings for such recognition and enforcement or setting-aside. The costs shall include attorneys fees the party has paid or is committed to pay to his counsel of record. The prevailing party shall be entitled to an award of costs, which shall include reasonable attorneys fees of the prevailing party against the unsuccessful party. The court shall determine the reasonableness of the claim for attorneys fees.

Rule 21.6. Governments exemption from payment of fees. - The Republic of the Philippines, its agencies and instrumentalities are exempt from paying legal fees provided in these Special ADR Rules. Local governments and government controlled corporation with or with or without independent charters are not exempt from paying such fees. RULE 22: APPLICABILITY OF THE RULES OF COURT Rule 22.1. Applicability of Rules of Court. - The provisions of the Rules of Court that are applicable to the proceedings enumerated in Rule 1.1 of these Special ADR Rules have either been included and incorporated in these Special ADR Rules or specifically referred to herein. In connection with the above proceedings, the Rules of Evidence shall be liberally construed to achieve the objectives of the Special ADR Rules. RULE 23: SEPARABILITY Rule 23.1. Separability Clause. - If, for any reason, any part of the Special ADR Rules shall be held unconstitutional or invalid, other Rules or provisions hereof which are not affected thereby, shall continue to be in full force and effect. RULE 24: TRANSITORY PROVISIONS Rule 24.1. Transitory Provision. - Considering its procedural character, the Special ADR Rules shall be applicable to all pending arbitration, mediation or other ADR forms covered by the ADR Act, unless the parties agree otherwise. The Special ADR Rules, however, may not prejudice or impair vested rights in accordance with law. RULE 25: ONLINE DISPUTE RESOLUTION Rule 25.1. Applicability of the Special ADR Rules to Online Dispute Resolution. Whenever applicable and appropriate, the Special ADR Rules shall govern the procedure for matters brought before the court involving Online Dispute Resolution. Rule 25.2. Scope of Online Dispute Resolution. - Online Dispute Resolution shall refer to all electronic forms of ADR including the use of the internet and other web or computed based technologies for facilitating ADR. RULE 26: EFFECTIVITY Rule 26.1. Effectivity. - The Special ADR Rules shall take effect fifteen (15) days after its complete publication in two (2) newspapers of general circulation.

RULE A: GUIDELINES FOR THE RESOLUTION OF ISSUES RELATED TO ARBITRATION OF LOANS SECURED BY COLLATERAL Rule A.1. Applicability of an arbitration agreement in a contract of loan applies to the accessory contract securing the loan. - An arbitration agreement in a contract of loan extends to and covers the accessory contract securing the loan such as a pledge or a mortgage executed by the borrower in favor of the lender under that contract of loan. Rule A.2. Foreclosure of pledge or extra-judicial foreclosure of mortgage not precluded by arbitration. - The commencement of the arbitral proceeding under the contract of loan containing an arbitration agreement shall not preclude the lender from availing himself of the right to obtain satisfaction of the loan under the accessory contract by foreclosure of the thing pledged or by extra-judicial foreclosure of the collateral under the real estate mortgage in accordance with Act No. 3135. The lender may likewise institute foreclosure proceedings against the collateral securing the loan prior to the commencement of the arbitral proceeding. By agreeing to refer any dispute under the contract of loan to arbitration, the lender who is secured by an accessory contract of real estate mortgage shall be deemed to have waived his right to obtain satisfaction of the loan by judicial foreclosure. Rule A.3. Remedy of the borrower against an action taken by the lender against the collateral before the constitution of the arbitral tribunal. - The borrower providing security for the payment of his loan who is aggrieved by the action taken by the lender against the collateral securing the loan may, if such action against the collateral is taken before the arbitral tribunal is constituted, apply with the appropriate court for interim relief against any such action of the lender. Such interim relief may be obtained only in a special proceeding for that purpose, against the action taken by the lender against the collateral, pending the constitution of the arbitral tribunal. Any determination made by the court in that special proceeding pertaining to the merits of the controversy, including the right of the lender to proceed against the collateral, shall be only provisional in nature. After the arbitral tribunal is constituted, the court shall stay its proceedings and defer to the jurisdiction of the arbitral tribunal over the entire controversy including any question regarding the right of the lender to proceed against the collateral.

Rule A.4. Remedy of borrower against action taken by the lender against the collateral after the arbitral tribunal has been constituted. - After the arbitral tribunal is constituted, the borrower providing security for the payment of his loan who is aggrieved by the action taken by the lender against the collateral securing the loan may apply to the arbitral tribunal for relief, including a claim for damages, against such action of the lender. An application to the court may also be made by the borrower against any action taken by the lender against the collateral securing the loan but only if the arbitral tribunal cannot act effectively to prevent an irreparable injury to the rights of such borrower during the pendency of the arbitral proceeding. An arbitration agreement in a contract of loan precludes the borrower therein providing security for the loan from filing and/or proceeding with any action in court to prevent the lender from foreclosing the pledge or extra-judicially foreclosing the mortgage. If any such action is filed in court, the lender shall have the right provided in the Special ADR Rules to have such action stayed on account of the arbitration agreement. Rule A.5. Relief that may be granted by the arbitral tribunal. - The arbitral tribunal, in aid of the arbitral proceeding before it, may upon submission of adequate security, suspend or enjoin the lender from proceeding against the collateral securing the loan pending final determination by the arbitral tribunal of the dispute brought to it for decision under such contract of loan. The arbitral tribunal shall have the authority to resolve the issue of the validity of the foreclosure of the thing pledged or of the extrajudicial foreclosure of the collateral under the real estate mortgage if the same has not yet been foreclosed or confirm the validity of such foreclosure if made before the rendition of the arbitral award and had not been enjoined. Rule A.6. Arbitration involving a third-party provider of security. - An arbitration agreement contained in a contract of loan between the lender and the borrower extends to and covers an accessory contract securing the loan, such as a pledge, mortgage, guaranty or suretyship, executed by a person other than the borrower only if such third-party securing the loan has agreed in the accessory contract, either directly or by reference, to be bound by such arbitration agreement. Unless otherwise expressly agreed upon by the third-party securing the loan, his agreement to be bound by the arbitration agreement in the contract of loan shall pertain to disputes arising from or in connection with the relationship between the lender and the borrower as well as the relationship between the lender and such third-party including the right of the lender to proceed against the collateral securing the loan, but shall exclude disputes pertaining to the relationship exclusively between the borrower and the provider of security such

as that involving a claim by the provider of security for indemnification against the borrower. In this multi-party arbitration among the lender, the borrower and the third party securing the loan, the parties may agree to submit to arbitration before a sole arbitrator or a panel of three arbitrators to be appointed either by an Appointing Authority designated by the parties in the arbitration agreement or by a default Appointing Authority under the law. In default of an agreement on the manner of appointing arbitrators or of constituting the arbitral tribunal in such multi-party arbitration, the dispute shall be resolved by a panel of three arbitrators to be designated by the Appointing Authority under the law. But even in default of an agreement on the manner of appointing an arbitrator or constituting an arbitral tribunal in a multi-party arbitration, if the borrower and the third party securing the loan agree to designate a common arbitrator, arbitration shall be decided by a panel of three arbitrators: one to be designated by the lender; the other to be designated jointly by the borrower and the provider of security who have agreed to designate the same arbitrator; and a third arbitrator who shall serve as the chairperson of the arbitral panel to be designated by the two party-designated arbitrators. REPUBLIC ACT NO. 8975 November 7, 2000

AN ACT TO ENSURE THE EXPEDITIOUS IMPLEMENTATION AND COMPLETION OF GOVERNMENT INFRASTRUCTURE PROJECTS BY PROHIBITING LOWER COURTS FROM ISSUING TEMPORARY RESTRANING ORDERS. PRELIMINARY INJUNCTIONS OR PRELIMINARY MANDATORY INJUNCTIONS, PROVIDING PENALTIES FOR VIOLATIONS THEREOF, AND FOR OTHER PURPOSES. Be it enacted by the Senate and House of Representatives of the Philippines Congress assembled: Section 1. Declaration of Policy. - Article XII, Section 6 of the Constitution states that the use of property bears a social function, and all economic agents shall contribute to the common good. Towards this end, the State shall ensure the expeditious and efficient implementation and completion of government infrastructure projects to avoid unnecessary increase in construction, maintenance and/or repair costs and to immediately enjoy the social and economic benefits therefrom. Section 2. Definition of Terms. (a) National government projects" shall refer to all current and future national government infrastructure, engineering works and service

contracts, including projects undertaken by government-owned and controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the BuildOperate-and-Transfer Law, and other related and necessary activities such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding. (b) "Service contracts" shall refer to infrastructure contracts entered into by any department, office or agency of the national government with private entities and non-government organizations for services related or incidental to the functions and operations of the department, office or agency concerned. Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Mandatory Injunctions. No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity, whether public or private acting under the government direction, to restrain, prohibit or compel the following acts: (a) Acquisition, clearance and development of the right-of-way and/or site or location of any national government project; (b) Bidding or awarding of contract/ project of the national government as defined under Section 2 hereof; (c) Commencement prosecution, execution, implementation, operation of any such contract or project;1awphil.net (d) Termination or rescission of any such contract/project; and (e) The undertaking or authorization of any other lawful activity necessary for such contract/project. This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that the applicant was not entitled to the relief sought.

In after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice to any liability that the guilty party may incur under existing laws. Section 4. Nullity of Writs and Orders. Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and effect. Section 5. Designation of Regional Trial Courts. - The Supreme Court may designate regional trial courts to act as commissioners with the sole function of receiving facts of the case involving acquisition clearance and development of right-of-way for government infrastructure projects. The designated regional trial court shall within thirty (30) days from the date of receipt of the referral, forwards its findings of facts to the Supreme Court for appropriate action. Section 6. Penal Sanction. In addition to any civil and criminal liabilities he or she may incur under existing laws, any judge who shall issue a temporary restraining order, preliminary injunction or preliminary mandatory injunction in violation of Section 3 hereof, shall suffer the penalty of suspension of at least sixty (60) days without pay. Section 7. Issuance of Permits. Upon payment in cash of the necessary fees levied under Republic Act No. 7160, as amended, otherwise known as the Local Government Code of 1991, the governor of the province or mayor of a highlyurbanized city shall immediately issue the necessary permit to extract sand, gravel and other quarry resources needed in government projects. The issuance of said permit shall consider environmental laws, land use ordinances and the pertinent provisions of the Local Government Code relating to environment. Section 8. Separability Clause. - If any provision of this Act is declared unconstitutional or invalid, other parts or provisions hereof not affected thereby shall continue to be of full force and effect. Section 9. Repealing Clause. - All laws, decrees, including Presidential Decree No. 605, 1818 and Republic Act No. 7160, as amended, orders, rules and regulations or parts thereof inconsistent with this Act are hereby repealed or amended accordingly. Section 10. Effectivity Clause. This Act shall take effect fifteen (15) days following its publication in at least two (2) newspapers of general circulation. Approved: November 7, 2000

(Sgd.)JOSEPH President of the Philippines

EJERCITO

ESTRADA

This web page features the full text of CIRCULAR NO. 68-94. CIRCULAR NO. 68-94 TO: JUDGES OF THE REGIONAL TRIAL COURTS, SHARIA DISTRICT COURTS, METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL COURTS IN CITIES, MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT TRIAL COURTS AND SHARIA CIRCUIT COURTS SUBJECT: STRICT OBSERVANCE OF SECTION 1 OF P.D. 1818 ENVISIONED BY CIRCULAR NO. 13093 DATED MARCH 5, 1993 AND CIRCULAR NO. 20-92 DATED MARCH 24, 1992. There have been reports that despite Circular 13-93 dated March 5, 1993, some courts are still issuing temporary restraining orders and/or preliminary injunctions even in cases, disputes, or controversies involving government infrastructure projects in violation of Section 1 of P.D. 1818, which provides:chanroblesvirtuallawlibrary "Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure

project, or a mining, fishery, forest, or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government officials from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation." In order to obviate complaints against the indiscriminate issuance if restraining orders and court injunctions against government public utilities and infrastructure projects in gross violation of the aforesaid Presidential Decree, the provision of Circular No. 13-93 issued on March 5, 1993 is hereby reiterated for your strict compliance. All Clerks of Courts are hereby directed to immediately furnish this Office copies of any restraining order(s) and/or writ(s) of injunction against government corporations and public utility firms. For strict compliance. November 3, 1994.

BAR MATTER NO. 803 February 17, 1998

Gentlemen: Quoted hereunder, for your information, is a resolution of the Court En Banc dated February 17, 1998 Bar Matter No. 803. Re: Correction of clerical errors in the 1997 Rules of Civil Procedure which were approved on April 8, 1997, effective July 1, 1997. The Court Resolved to CORRECT the following provisions in the 1997 Rules of Civil Procedure: (a) Section 7 of Rule 13; (b) Section 1 (c) of Rule 50; (c) Section 5 of Rule 58; and Section 1 of Rule 63; and (e) Section 2 of Rule 64, to read as follows: RULE 13 Section 7. Service by mail. Service by registered mail shall be made by depositing the copy in the post office, in a sealed envelope, plainly addressed to the party or his counsel at his office, if known otherwise at his residence, if known, with postage fully pre-paid, and with instructions to the postmaster to return the mail to the sender after ten (10) days if undelivered. If no registry service is available in the locality of either the sender or the addressee, service may be done by ordinary mail. (5a) RULE 50 SECTION 1. Grounds for dismissal of appeal. An appeal may be dismissed by the Court of Appeals on its own motion or on that of the appellee on the following grounds. xxx xxx xxx (c) Failure of the appellant to pay the docket and other lawful fees as provided in section 5 of Rule 40 and section 4 of Rule 41; RULE 58 Section 5. Preliminary injunction not granted without notice; exception. No preliminary injunction shall be granted without hearing and prior notice to the party or person sought to be enjoined. If it shall appear from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice the court to which the application for preliminary injunction was made, may issue a temporary restraining order to be effective only for a period of twenty (20) days from service on the party or person sought to be enjoined except as herein provided. Within the said twenty-day period, the court must order said party or person to show cause, at a specified time and place, why the injunction should not be granted, determine within the same period whether or not the

preliminary injunction corresponding order. RULE 63

shall

be

granted

and

accordingly

issue

the

SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder. RULE 64 Section 2. Mode of review. A judgment or final order or resolution of the Commission on Elections and the Commission on Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided. (n) Very truly yours, (Sgd.) LUZVIMINDA D. PUNO Clerk of Court This web page features the full text of CIRCULAR NO. 13-93. CIRCULAR NO. 13-93 TO: JUDGES OF THE REGIONAL TRIAL COURTS, SHARIA DISTRICT COURTS, METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL COURTS IN CITIES, MUNICIPAL TRIAL COURTS, MUNICIPAL CIRCUIT TRIAL COURTS AND SHARIA COURTS SUBJECT : PRESIDENTIAL DECREE NO. 1818. The Office of the Court Administrator has been continuously receiving reports and/or complaints against

indiscriminate issuance of restraining orders and court injunctions against the National Power Corporation and other government public utility firms in gross violation of Sec 1 of P. D. 1818.cralaw For the information and guidance of all concerned, the Supreme Court in the case of "National Power Corporation vs. Hon. Abraham Vera", G. R. No. 83558, February 27, 1989, 170 SCRA 721, categorically ruled that the National Power Corporation is entitled to the protective mantle of the aforecited decree for the higher interest of public service. Section 1 of P. D. 1818 provides:chanroblesvirtuallawlibrary "Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or a mining, fishery, forest, or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government officials from proceeding with, or continuing the execution or implementation of, any such project, or the operation of

such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation." All Clerks of Court are directed to immediately furnish this Office copies of any restraining orders and/or writs of injunction against the National Power Corporation or other government public utility firms. Strict compliance hereof is enjoined.cralaw March 5, 1993.

ADMINISTRATIVE CIRCULAR NO. 20-95 September 12, 1995 TO: COURT OF APPEALS, SANDIGANBAYAN, COURT OF TAX APPEALS, REGIONAL TRIAL COURTS, METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL COURTS, MUNICIPAL TRIAL COURTS IN CITIES, MUNICIPAL CIRCUIT TRIAL COURTS, SHARI'A DISTRICT COURTS, SHARI'A CIRCUIT COURTS AND ALL MEMBERS OF THE INTEGRATED BAR OF THE PHILIPPINES SUBJECT: RE: SPECIAL RULES FOR TEMPORARY RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS. 1. Where an application for temporary restraining order (TRO) or writ of preliminary injunction is included in a complaint or any initiatory pleading filed with the trial court, such compliant or initiatory pleading shall be raffled only after notice to the adverse party and in the presence of such party or counsel. 2. The application for a TRO shall be acted upon only after all parties are heard in a summary hearing conducted within twenty-four (24) hours after the records are transmitted to the branch selected by raffle. The records shall be transmitted immediately after raffle. 3. If the matter is of extreme urgency, such that unless a TRO is issued, grave injustice and irreparable injury will arise, the Executive Judge shall issue the TRO effective only for seventy-two (72) hours from issuance but shall immediately summon the parties fro conference and immediately raffle the case in their presence. Thereafter, before the expiry of the seventy-two (72) hours,

the Presiding Judge to whom the case is assigned shall conduct a summary hearing to determine whether the TRO can be extended for another period until a hearing in the pending application for preliminary injunction can be conducted. In no case shall the total period of the TRO exceed twenty (20) days, including the original seventy-two (72) hours, for the TRO issued by the Executive Judge. 4. With the exception of the provisions which necessarily involve multiple-sala stations, these rules shall apply to single-sala stations especially with regard to immediate notice to all parties of all applications for TRO. For immediate compliance. This Circular shall be published in two (2) newspaper of general circulation and shall take effect on October 1, 1995." September 12, 1995. (Sgd.)ANDRES Chief Justice R. NARVASA

The Lawphil Project - Arellano Law Foundation

VOL. 434, JULY 8, 2004 65 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation G.R. No. 158540. July 8, 2004.* SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE SECRETARY OF THE DEPARTMENT OF TRADE & INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE, and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.

Taxation; Judicial Review; Prohibition; The Court did not grant the provisional relief for it would be tantamount to enjoining the collection of _______________

27 National Bookstore, Inc. v. Court of Appeals, G.R. No. 146741, 27 February 2002, 378 SCRA 194, 204. * SECOND DIVISION. 66

66 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation taxes, a peremptory judicial act which is traditionally frowned upon, unless there is a clear statutory basis for it.The Court did not grant the provisional relief for it would be tantamount to enjoining the collection of taxes, a peremptory judicial act which is traditionally frowned upon, unless there is a clear statutory basis for it. In that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from granting an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the internal revenue code. A similar philosophy is expressed by Section 29 of the SMA, which states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures. This evinces a clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition. Same; Same; Forum Shopping; The standard on forum shopping implies a malicious intent to subvert procedural rules, and such state of mind is not evident in this case.The standard by Section 5, Rule 7 of the 1997 Rules of Civil Procedure in order that sanction may be had is that the acts of the party or his counsel clearly constitute willful and deliberate forum shopping. The

standard implies a malicious intent to subvert procedural rules, and such state of mind is not evident in this case. Same; Same; Court of Tax Appeals; Jurisdiction; Republic Act No. 1125, the statute creating the CTA, does not extend to it the power to review decisions of the DTI Secretary in connection with the imposition of safeguard measures. The Court has long recognized the legislative determination to vest sole and exclusive jurisdiction on matters involving internal revenue and customs duties to such a specialized court. By the very nature of its function, the CTA is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject. At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a case should be clearly conferred and should not be deemed to exist on mere implication. Concededly, Rep. Act No. 1125, the statute creating the CTA, does not extend to it the power to review decisions of the DTI Secretary in connection with the imposition of safeguard measures. Same; Same; Same; Same; Requisites; Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review.Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must be in connection with the imposition of a 67

VOL. 434, JULY 8, 2004 67 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation safeguard measure. The first two requisites are clearly present. The third requisite deserves closer scrutiny. Same; Same; Same; Same; Split jurisdiction is not favored.The Court agrees with the observation of the [that] when an administrative agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its specialization are deemed to be included within the

jurisdiction of said administrative agency or body. Split jurisdiction is not favored. Same; Same; Same; Same; Section 29 is likewise explicit that only the rulings of the DTI Secretary or the Agriculture Secretary may be reviewed by the CTA.The authority to decide on the safeguard measure is vested in the DTI Secretary in the case of non-agricultural products, and in the Secretary of the Department of Agriculture in the case of agricultural products. Section 29 is likewise explicit that only the rulings of the DTI Secretary or the Agriculture Secretary may be reviewed by the CTA. Thus, the acts of other bodies that were granted some powers by the SMA, such as the Tariff Commission, are not subject to direct review by the CTA. Same; Same; Same; Same; Certiorari; Certiorari is often resorted to in order to correct errors of jurisdiction; where the error is one of law or of fact, which is a mistake of judgment, appeal is the remedy.For a special civil action for certiorari to succeed, it is not enough that the questioned act of the respondent is wrong. As the Court clarified in Sempio v. Court of Appeals: A tribunal, board or officer acts without jurisdiction if it/he does not have the legal power to determine the case. There is excess of jurisdiction where, being clothed with the power to determine the case, the tribunal, board or officer oversteps its/his authority as determined by law. And there is grave abuse of discretion where the tribunal, board or officer acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of his judgment as to be said to be equivalent to lack of jurisdiction. Certiorari is often resorted to in order to correct errors of jurisdiction. Where the error is one of law or of fact, which is a mistake of judgment, appeal is the remedy. Same; Legislative Power; The executive power to impose definitive safeguard measures is but a delegated powerthe power of taxation, by nature and by command of the fundamental law, being a preserve of the legislature.Such legislative intent should be given full force and effect, as the executive power to impose definitive safeguard measures is but a delegated powerthe power of taxation, by nature and by command of the fundamental law, being a preserve of the legislature. Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative power, yet ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this power. 68

68 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Same; Same; This delegation of the taxation power by the legislative to the executive is authorized by the Constitution itself.This delegation of the taxation power by the legislative to the executive is authorized by the Constitution itself. At the same time, the Constitution also grants the delegating authority (Congress) the right to impose restrictions and limitations on the taxation power delegated to the President. The restrictions and limitations imposed by Congress take on the mantle of a constitutional command, which the executive branch is obliged to observe. PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Tadeo F. Hilado for petitioner. Edcel C. Lagman for private respondent CMAP. The Solicitor General for public respondents. Abundio D. Marapao, Jr. for V.T. Lao Construction. TINGA, J.:

Good fences make good neighbors, so observed Robert Frost, the archetype of traditional New England detachment. The Frost ethos has been heeded by nations adjusting to the effects of the liberalized global market.1 The Philippines, for one, enacted Republic Act (Rep. Act) No. 8751 (on the imposition of countervailing duties), Rep. Act No. 8752 (on the imposition of anti-dumping duties) and, finally, Rep. Act No. 8800, also known as the Safeguard Measures Act (SMA)2 soon after it joined the General Agreement _______________

1 Globalization is the removal of barriers to free trade and the closer integration of national economies. In recent times, protests against globalization have entered a new stage. Riots and demonstrations against the policies of and actions by institutions of globalization have become commonplace even in developed countries. Frances Jacques Chirac has expressed concern that globalization is not making life better for those most in need of its promised benefits. J. Stiglitz, Globalization and Its Discontents, pp. 1-4 (2002). 2 The policy objective that guides the General Safeguard Measures Act is enunciated in Section 2 thereof, which reads: Section 2. Declaration of Policy.The State shall promote the competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and the efficient use of human, natural and technical re69

VOL. 434, JULY 8, 2004 69 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.3 The SMA provides the structure and mechanics for the imposition of emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.4 The wisdom of the policies behind the SMA, however, is not put into question by the petition at bar. The questions submitted to the Court relate to the means and the procedures ordained in the law to ensure that the determination of the imposition or non-imposition of a safeguard measure is proper. Antecedent Facts Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in the business of cement manufacturing, production, importation and exportation. Its principal stockholders are Taiheiyo Cement

Corporation and Tokuyama Corporation, purportedly the largest cement manufacturers in Japan.5 Private respondent Philippine Cement Manufacturers Corporation6 (Philcemcor) is an association of domestic cement manufacturers. It has eighteen (18) members,7 per Record. While Philcem_______________

sources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers. 3 GATT was a collection of treaties governing access to the economics of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute settlement. (See Taada v. Angara, 338 Phil. 546, 556; 272 SCRA 18 [1997]) Originally formulated in 1947, the GATT was updated in 1994 to take into account substantive and institutional changes negotiated in the Uruguay Round. A comprehensive history of the GATT is recounted in Footnote No. 1 of Taada v. Angara, Id., at pp. 557-561. 4 Supra note 2. 5 Rollo, p. 14. 6 Philcemcor has since renamed itself the Cement Manufacturers Association of the Philippines. Rollo, p. 1364. 7 Union Cement Corporation, Northern Cement Corporation, Limay Grinding Mill Corporation, Republic Cement Corporation, Continental 70

70 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation

cor heralds itself to be an association of domestic cement manufacturers, it appears that considerable equity holdings, if not controlling interests in at least twelve (12) of its member-corporations, were acquired by the three largest cement manufacturers in the world, namely Financiere Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then Holderfin B.V.).8 On 22 May 2001, respondent Department of Trade and Industry (DTI) accepted an application from Philcemcor, alleging that the importation of gray Portland cement9 in increased quantities has caused declines in domestic production, capacity utilization, market share, sales and employment; as well as caused depressed local prices. Accordingly, Philcemcor sought the imposition at first of provisional, then later, definitive safeguard measures on the import of cement pursuant to the SMA. Philcemcor filed the application in behalf of twelve (12) of its member-companies.10 _______________

Operating Corporation, Rizal Cement Company, Inc., Solid Cement Corporation, FR Cement Corporation, Union Cement Corporation, Fortune Cement Corporation, Apo Cement Corporation, Lloyds-Richfield Industrial Corporation, Grand Cement Manufacturing Corporation, Alsons Cement Corporation, Iligan Cement Corporation, Mindanao Portland Cement Corporation, Pacific Cement Company, Inc., and Union Cement Corporation. Vide Staff Report on Formal Investigation of Safeguard Measures Case Against Importations of Gray Portland Cement. Rollo, p. 132. 8 Vide Staff Report on Formal Investigation of Safeguard Measures Case Against Importations of Gray Portland Cement. Rollo at p. 133. This fact was confirmed by counsel for Philcemcor during the oral argument before this Court on 18 February 2004. See TSN, pp. 157-158, 18 February 2004. 9 Philcemcors application covered gray Portland cement of all types and excluded white Portland cement, aluminous cement, and masonry cement. Rollo, p. 127. 10 Namely, Philcemcor in behalf of twelve (12) of its member-companies, as follows: Alsons Cement Corporation; Apo Cement Corporation; Continental Operating Corporation, Fortune Cement Corporation; FR Cement Corporation; Iligan Cement Corporation; Lloyds Richfield Industrial Corporation; Mindanao

Portland Cement Corporation; Republic Cement Corporation; Rizal Cement Company, Inc.; Solid Cement Corporation; and Union Cement Corporation. The other cement producers (i.e., Limay Grinding Mill Corporation and Pacific Cement Philippines, Inc.) that did not join the application nevertheless supported the application for the imposition of the safeguard measures. Rollo, p. 127. Limay Grinding 71

VOL. 434, JULY 8, 2004 71 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation After preliminary investigation, the Bureau of Import Services of the DTI, determined that critical circumstances existed justifying the imposition of provisional measures.11 On 7 November 2001, the DTI issued an Order, imposing a provisional measure equivalent to Twenty Pesos and Sixty Centavos (P20.60) per forty (40) kilogram bag on all importations of gray Portland cement for a period not exceeding two hundred (200) days from the date of issuance by the Bureau of Customs (BOC) of the implementing Customs Memorandum Order.12 The corresponding Customs Memorandum Order was issued on 10 December 2001, to take effect that same day and to remain in force for two hundred (200) days.13 In the meantime, the Tariff Commission, on 19 November 2001, received a request from the DTI for a formal investigation to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement, pursuant to Section 9 of the SMA and its Implementing Rules and Regulations. A notice of commencement of formal investigation was published in the newspapers on 21 November 2001. Individual notices were likewise sent to concerned parties, such as Philcemcor, various importers and exporters, the Embassies of Indonesia, Japan and Taiwan, contractors/builders associations, industry associations, cement workers groups, consumer groups, nongovernment organizations and concerned government agencies.14 A preliminary conference was held on 27 November 2001, attended by several concerned parties, including Southern Cross.15 Subsequently, the Tariff Commission

_______________

Mill Corporation and Pacific Cement Philippines, Inc. did not join the application yet nevertheless supported the same. Id. 11 Ibid. 12 Id., at p. 128. 13 Ibid. Customs Memorandum Order No. 38-2001 directed that all importations from all countries of gray Portland cement, including blended Portland cement that contains pozzolan, slag or other additives, whether in bulk or bags, classified under HS Codes 2523.29 00 and 2523.90 00, shall be imposed, in addition to taxes and duties and other charges, a cash bond amounting to P20.60 per 40-kg. bag or its equivalent in bulk. 14 Id., at p. 129. 15 Also in attendance were representatives from Philcemcor, Lafarge, Cemex, TCC Cement Corporation, Southern Cross Cement Corporation, PriceWaterhouse Coopers, Samstone Infra-Construction Supply, Westpoint Industrial Sales Company, Cohaco Trading Corporation, Philippine Constructors Association, Confederation of Homeowners Association for 72

72 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation received several position papers both in support and against Philcemcors application.16 The Tariff Commission also visited the corporate offices and manufacturing facilities of each of the applicant companies, as well as that of Southern Cross and two other cement importers.17 On 13 March 2002, the Tariff Commission issued its Formal Investigation Report (Report). Among the factors studied by the Tariff Commission in its

Report were the market share of the domestic industry,18 production and sales,19 capacity utiliza_______________

Reforms on Governance and Environment, Ssangyong Corporation, National Constructors Association of the Philippines, Private Sector Consultative Council for Shelter, Fair Trade Alliance, Philippine Cement Workers Council, Refractories Corporation of the Philippines, Embassy of Japan, Embassy of Indonesia, the House of Representatives, and Arellano Law School. Id., at p. 130. 16 Ibid. Position papers supporting the application were received from: Philcemcor; Refractories Corporation of the Philippines; Tiger Machinery and Industrial Corporation; Cembag Plastic Industries, Ltd.; Union Lock Industrial and Trading Corporation; Refratrade Industrial Resources. Inc., CAPP Industries, Inc.; Noble Energy; Arcman Corporation; United Bag Manufacturing Corporation; IGNIS Ltd., Accufloor, Inc.; Primex International Philippines, Inc.; and Allied Distributor. On the other hand, position papers/manifestations opposing the application were submitted by: Southern Cross; Taiheiyo Cement Corporation; TCC Cement Corporation; Taiwan Cement Corporation; Cohaco Trading Corporation; Samstone Infra-Construction Supply; Consumers Union of the Philippines; Confederation of Homeowners Association for Reforms on Governance and Environment; Philippine Constructors Association; and the Embassy of Indonesia. 17 The visits were conducted during the period of 10 December 2001 to 17 January 2002. The information gathered or verified during the visits pertained to such matters as the production process, production lines, machinery and equipment, quality test results, plant capacities, production levels, production cost, sales, selling prices, loans, employment, inventory levels, company ownership, and plant shutdowns or mothballing plans. Id., at p. 131. 18 The Tariff Commission concluded that while the market share of the domestic industry (i.e., the applicant-companies) had declined from almost 99% in 1998 to 80% in 2001, the local industry remained the significantly dominant market player. Id., at pp. 290-291.

19 The Report determined that while domestic sales of the applicant-companies had declined since 1998, such decline was offset by an increase in export sales volume. The domestic industry likewise suffered a decline 73

VOL. 434, JULY 8, 2004 73 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation tion,20 financial performance and profitability,21 and return on sales.22 The Tariff Commission arrived at the following conclusions: 1. The circumstances provided in Article XIX of GATT 1994 need not be demonstrated since the product under consideration (gray Portland cement) is not the subject of any Philippine obligation or tariff concession under the WTO Agreement. Nonetheless, such inquiry is governed by the national legislation (R.A. 8800) and the terms and conditions of the Agreement on Safeguards. 2. The collective output of the twelve (12) applicant companies constitutes a major proportion of the total domestic production of gray Portland cement and blended Portland cement. 3. Locally produced gray Portland cement and blended Portland cement (Pozzolan) are like to imported gray Portland cement. 4. Gray Portland cement is being imported into the Philippines in increased quantities, both in absolute terms and relative to domestic production, starting in 2000. The increase in volume of imports is recent, sudden, sharp and significant. _______________

in production in the year 2000, when imports started to surge, at a rate of 5% from the previous year, yet such decline was not sharp nor significant enough relative to the years prior to the surge to constitute serious impairment in the production and sales of the industry. Id., at p. 292.

20 Anent the applicant-companies, it was found that while industry capacity utilization declined from 1996 to 1999, the decline was actually arrested in 2000, the year imports surged. Capacity utilization did decline in the first three quarters of 2001 relative to the same period in 2000, yet such decline was not sudden, sharp, nor significant enough in the contemplation of the law as to constitute serious impairment of the industrys overall condition. Id., at p. 294. 21 It was determined that total sales revenues of the applicant companies in the year 2000, when imports surged, had actually peaked at P25.97 billion pesos, the highest level in at least five years. The applicant-companies income from operations had likewise registered a profit of P1.98 billion in 2000, representing an upturn of 175.51% from 1999, before imports surged, when a total loss of P2.62 billion was incurred by these companies. Id., at p. 296. 22 According to the Tariff Commission, a negative return on sales of the applicant-companies was registered in 1999, when imports had not yet surged, due to a deficit from operations of P2.62 billion in 1999. However, as imports surged in 2000, the applicant-companies had registered a positive return of 7.62%, as operating income of P1.98 billion was realized for that year. Id., at p. 298. 74

74 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation 5. The industry has not suffered and is not suffering significant overall impairment in its condition, i.e., serious injury. 6. There is no threat of serious injury that is imminent from imports of gray Portland cement. 7. Causation has become moot and academic in view of the negative determination of the elements of serious injury and imminent threat of serious injury.23 Accordingly, the Tariff Commission made the following recommendation, to wit:

The elements of serious injury and imminent threat of serious injury not having been established, it is hereby recommended that no definitive general safeguard measure be imposed on the importation of gray Portland cement.24 The DTI received the Report on 14 March 2002. After reviewing the report, then DTI Secretary Manuel Roxas II (DTI Secretary) disagreed with the conclusion of the Tariff Commission that there was no serious injury to the local cement industry caused by the surge of imports.25 In view of this disagreement, the DTI requested an opinion from the Department of Justice (DOJ) on the DTI Secretarys scope of options in acting on the Commissions recommendations. Subsequently, then DOJ Secretary Hernando Perez rendered an opinion stating that Section 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commissions negative finding, or finding that a definitive safeguard measure should not be imposed.26 On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the conclusions of the Tariff Commission, the DTI Secretary noted the DTIs disagreement with the conclusions. However, he also cited the DOJ Opinion advising the DTI that it was bound by the negative finding of the Tariff Commission. Thus, he ruled as follows: The DTI has no alternative but to abide by the [Tariff] Commissions recommendations. _______________

23 Id., at p. 302. 24 Id., at p. 303. 25 Rollo, p. 343. 26 Id., at pp. 334-341. 75

VOL. 434, JULY 8, 2004 75

Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation IN VIEW OF THE FOREGOING, and in accordance with Section 13 of RA 8800 which states: In the event of a negative final determination; or if the cash bond is in excess of the definitive safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder thereof, as the case may be, previously collected as provisional general safeguard measure within ten (10) days from the date a final decision has been made; Provided, that the government shall not be liable for any interest on the amount to be returned. The Secretary shall not accept for consideration another petition from the same industry, with respect to the same imports of the product under consideration within one (1) year after the date of rendering such a decision. The DTI hereby issues the following: The application for safeguard measures against the importation of gray Portland cement filed by PHILCEMCOR (Case No. 02-2001) is hereby denied.27 (Emphasis in the original) Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus28 seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. Philcemcor likewise applied for a Temporary Restraining Order/Injunction to enjoin the DTI and the BOC from implementing the questioned Decision and Report. It prayed that the Court of Appeals direct the DTI Secretary to disregard the Report and to render judgment independently of the Report. Philcemcor argued that the DTI Secretary, vested as he is under the law with the power of review, is not bound to adopt the recommendations of the Tariff Commission; and, that the Report is void, as it is predicated on a flawed framework, inconsistent inferences and erroneous methodology.29 _______________

27 Rollo, pp. 343-345. 28 Id., at pp. 345-416.

29 Among other claims, Philcemcor alleged that the Tariff Commission arbitrarily ignored the nature of the cement industry in evaluating the injury factors. Rollo, p. 394. 76

76 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation On 10 June 2002, Southern Cross filed its Comment.30 It argued that the Court of Appeals had no jurisdiction over Philcemcors Petition, for it is on the Court of Tax Appeals (CTA) that the SMA conferred jurisdiction to review rulings of the Secretary in connection with the imposition of a safeguard measure. It likewise argued that Philcemcors resort to the special civil action of certiorari is improper, considering that what Philcemcor sought to rectify is an error of judgment and not an error of jurisdiction or grave abuse of discretion, and that a petition for review with the CTA was available as a plain, speedy and adequate remedy. Finally, Southern Cross echoed the DOJ Opinion that Section 13 of the SMA precludes a review by the DTI Secretary of a negative finding of the Tariff Commission. After conducting a hearing on 19 June 2002 on Philcemcors application for preliminary injunction, the Court of Appeals Twelfth Division31 granted the writ sought in its Resolution dated 21 June 2002.32 Seven days later, on 28 June 2002, the two-hundred (200) day period for the imposition of the provisional measure expired. Despite the lapse of the period, the BOC continued to impose the provisional measure on all importations of Portland cement made by Southern Cross. The uninterrupted assessment of the tariff, according to Southern Cross, worked to its detriment to the point that the continued imposition would eventually lead to its closure.33 Southern Cross timely filed a Motion for Reconsideration of the Resolution on 9 September 2002. Alleging that Philcemcor was not _______________

30 Rollo, pp. 418-490. 31 Chaired by Associate Justice Portia Alio-Hormachuelos, and with Justices Elvi John S. Asuncion and Edgardo F. Sundiam as members. 32 Rollo, pp. 492-493. Penned by Justice E.J.S. Asuncion, concurred in by Justices P. Alio-Hormachuelos and E.F. Sundiam. The dispositive portion of the Writ of Preliminary Injunction reads as follows: NOW, THEREFORE, You, the public respondents, the Hon. Secretary of the Dept. of Trade & Industry, the Tariff Commission, the Hon. Commissioner of the Bureau of Customs, and the Hon. Secretary of the Dept. of Finance or any of your agents or representatives, are hereby restrained and prohibited from enforcing the decision dated April 5, 2002 of the Hon. Secretary Manuel A. Roxas II of the Dept. of Trade & Industry in DTI SG No. 02-2001. SO ORDERED. (Rollo, p. 496) 33 Rollo, p. 24. 77

VOL. 434, JULY 8, 2004 77 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation entitled to provisional relief, Southern Cross likewise sought a clarificatory order as to whether the grant of the writ of preliminary injunction could extend the earlier imposition of the provisional measure beyond the two hundred (200)-day limit imposed by law. The appeals court failed to take immediate action on Southern Crosss motion despite the four (4) motions for early resolution the latter filed between September of 2002 and February of 2003. After six (6) months, on 19 February 2003, the Court of Appeals directed Philcemcor to comment on Southern Crosss Motion for Reconsideration.34 After Philcemcor filed its Opposition35 on 13 March 2003, Southern Cross filed another set of four (4) motions for early resolution. Despite the efforts of Southern Cross, the Court of Appeals failed to directly resolve the Motion for Reconsideration. Instead, on 5 June 2003, it rendered a

Decision,36 granting in part Philcemcors petition. The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion. It refused to annul the findings of the Tariff Commission, citing the rule that factual findings of administrative agencies are binding upon the courts and its corollary, that courts should not interfere in matters addressed to the sound discretion and coming under the special technical knowledge and training of such agencies.37 Nevertheless, it held that the DTI Secretary is not bound by the factual findings of the Tariff Commission since such findings are merely recommendatory and they fall within the ambit of the _______________

34 Id., at p. 594. The 19 February 2003 Resolution of the Court of Appeals also granted the Motion for Intervention filed by Vicente T. Lao. However, despite due notice, Lao failed to file his comment in intervention. See Rollo, p. 72. 35 In the meantime, frustrated by the failure of the Court of Appeals to resolve Southern Crosss Motion for Reconsideration, Southern Cross filed a Petition for Certiorari with this Court on 12 March 2003. See Rollo, pp. 596-654. Owing to the pending Motion for Reconsideration before the Court of Appeals, the Supreme Court First Division dismissed Southern Crosss first Petition for Certiorari as premature in a Resolution dated 17 March 2003. Rollo, p. 655. 36 Rollo, pp. 67-84. Penned by Justice E.J.S. Asuncion, concurred in by Justices P. Alio-Hormachuelos and E.F. Sundiam. 37 Rollo, pp. 75-76, citing Litonjua v. Court of Appeals, 286 SCRA 136 (1998) and Sta. Ines Melale Forest Products Corporation v. Macaraig, 299 SCRA 491 (1998). 78

78 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation

Secretarys discretionary review. It determined that the legislative intent is to grant the DTI Secretary the power to make a final decision on the Tariff Commissions recommendation.38 The dispositive portion of the Decision reads: WHEREFORE, based on the foregoing premises, petitioners prayer to set aside the findings of the Tariff Commission in its assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE. Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and Industry for a final decision in accordance with RA 8800 and its Implementing Rules and Regulations. SO ORDERED.39 On 23 June 2003, Southern Cross filed the present petition, assailing the appellate courts Decision for departing from the accepted and usual course of judicial proceedings, and not deciding the substantial questions in accordance with law and jurisprudence. The petition argues in the main that the Court of Appeals has no jurisdiction over Philcemcors petition, the proper remedy being a petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence conditions warranting the imposition of general safeguard measures are binding upon the DTI Secretary. The timely filing of Southern Crosss petition before this Court necessarily prevented the Court of Appeals Decision from becoming final.40 Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time that that in light of the appellate courts Decision there was no longer any legal impediment to his deciding Philcemcors application for definitive safeguard measures.41 He _______________

38 Id., at p. 82. 39 Id., at p. 83. 40 See Section 2, Rule 36, 1997 Rules of Civil Procedure.

41 Rollo, p. 685. Prior to the promulgation of this new Decision, Southern Cross was already apprehensive that the DTI Secretary might act favorably on Philcemcors petition in light of the Court of Appeals ruling. Southern Cross sent a letter dated 19 June 2003 to DTI Secretary Roxas, informing him that Southern Cross would be appealing the Court of Appeals Decision to the Supreme Court, and that [w]e trust that, in 79

VOL. 434, JULY 8, 2004 79 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation made a determination that, contrary to the findings of the Tariff Commission, the local cement industry had suffered serious injury as a result of the import surges.42 Accordingly, he imposed a definitive safeguard measure on the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray Portland Cement.43 On 7 July 2003, Southern Cross filed with the Court a Very Urgent Application for a Temporary Restraining Order and/or A Writ of Preliminary Injunction (TRO Application), seeking to enjoin the DTI Secretary from enforcing his Decision of 25 June 2003 in view of the pending petition before this Court. Philcemcor filed an opposition, claiming, among others, that it is not this Court but the CTA that has jurisdiction over the application under the law. On 1 August 2003, Southern Cross filed with the CTA a Petition for Review, assailing the DTI Secretarys 25 June 2003 Decision which imposed the definite safeguard measure. Prescinding from this action, Philcemcor filed with this Court a Manifestation and Motion to Dismiss in regard to Southern Crosss petition, alleging that it deliberately and willfully resorted to forum-shopping. It points out that Southern Crosss TRO Application seeks to enjoin the DTI Secretarys second decision, while its Petition before the CTA prays for the annulment of the same decision.44 _______________

accordance with the Rules of Court, you will refrain from assuming jurisdiction or from taking any action on the Application for Safeguard Measures filed by Philcemcor until after the Supreme Court shall have finally decided on our appeal x x x. See Rollo, pp. 679-680. 42 Among the factors cited by the DTI as basis for holding that there was serious injury was the decline in sales volumes during the period of the import surge, sales volume decreasing by 11.72% in 2000, and by 13.28% during the first three quarters of 2001. It also cited the decline in the domestic industrys market share from 98.60% in 1998 to 79.23% in 2001, representing a 20% drop. The import surge had also caused the idling of seven (7) dry kilns, a decline in actual production of the domestic industry by 7.2% from 1998 to 2001; a decrease in capacity utilization; and net losses to the domestic industry amounting to around P7.7 billion in 1999 and P5.5 billion in 2000. See Rollo, pp. 688-690. 43 Rollo, pp. 681-699. 44 There is a certain novelty to Philcemcors claim, considering that the purported common identity of causes of action arose not with the filing of the initiatory pleading, but with the ancillary action for injunction. We 80

80 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Reiterating its Comment on Southern Crosss Petition for Review, Philcemcor also argues that the CTA, being a special court of limited jurisdiction, could only review the ruling of the DTI Secretary when a safeguard measure is imposed, and that the factual findings of the Tariff Commission are not binding on the DTI Secretary.45 After giving due course to Southern Crosss Petition, the Court called the case for oral argument on 18 February 2004.46 At the oral argument, attended by the counsel for Philcemcor and Southern Cross and the Office of the Solicitor

General, the Court simplified the issues in this wise: (i) whether the Decision of the DTI Secretary is appealable to the CTA or the Court of Appeals; (ii) assuming that the Court of Appeals has jurisdiction, whether its Decision is in accordance with law; and, (iii) whether a Temporary Restraining Order is warranted.47 During the oral arguments, counsel for Southern Cross manifested that due to the imposition of the general safeguard measures, Southern Cross was forced to cease operations in the Philippines in November of 2003.48 Propriety of the Temporary Restraining Order Before the merits of the Petition, a brief comment on Southern Crosss application for provisional relief. It sought to enjoin the DTI Secretary from enforcing the definitive safeguard measure he imposed in his 25 June 2003 Decision. The Court did not grant the provisional relief for it would be tantamount to enjoining the collection of taxes, a peremptory judicial act which is traditionally _______________

do not doubt that forum shopping can be committed even if the identical relief or cause of action is sought or asserted before a different forum not in the initiatory pleading, but in an application for provisional relief. Forum shopping is frowned upon as it affords the litigant the opportunity to avail of the same relief based on the same cause of action before different jurisdictions. For so long as the courts or tribunals are capacitated to grant the reliefs sought, the mode through which the redress is sought becomes immaterial. 45 Rollo, pp. 952-1005. 46 In a Resolution dated 4 February 2004. See Rollo, p. 1191. 47 TSN, 18 February 2004, p. 3. 48 Ibid. 81

VOL. 434, JULY 8, 2004

81 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation frowned upon,49 unless there is a clear statutory basis for it.50 In that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from granting an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the internal revenue code.51 A similar philosophy is expressed by Section 29 of the SMA, which states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures.52 This evinces a clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition. The Forum Shopping Issue In the same breath, we are not convinced that the allegation of forum-shopping has been duly proven, or that sanction should befall upon Southern Cross and its counsel. The standard by Section 5, Rule 7 of the 1997 Rules of Civil Procedure in order that sanction may be had is that the acts of the party or his counsel clearly constitute willful and deliberate forum shopping.53 The standard implies a malicious intent to subvert procedural rules, and such state of mind is not evident in this case. The Jurisdictional Issue On to the merits of the present petition. In its assailed Decision, the Court of Appeals, after asserting only in brief that it had jurisdiction over Philcemcors Petition, discussed the issue of whether or not the DTI Secretary is bound to adopt the negative recommendation of the Tariff Commission on the application for safeguard measure. The Court of Appeals maintained that it had jurisdiction over the petition, as it alleged grave abuse of discretion on the part of the DTI Secretary, thus: _______________

49 See e.g., Churchill v. Rafferty, 32 Phil. 580, 582-583 (1915); David v. Hon. Ramos, 90 Phil. 351, 354-356 (1951).

50 See e.g., Section 11, Rep. Act No. 1125. 51 See Section 218, Rep. Act No. 8424. 52 See Section 29, Rep. Act No. 8800. 53 See Section 5, Rule 7, 1997 Rules of Civil Procedure. 82

82 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation A perusal of the instant petition reveals allegations of grave abuse of discretion on the part of the DTI Secretary in rendering the assailed April 5, 2002 Decision wherein it was ruled that he had no alternative but to abide by the findings of the Commission on the matter of safeguard measures for the local cement industry. Abuse of discretion is admittedly within the ambit of certiorari. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. It is alleged that, in the assailed Decision, the DTI Secretary gravely abused his discretion in wantonly evading to discharge his duty to render an independent determination or decision in imposing a definitive safeguard measure.54 We do not doubt that the Court of Appeals certiorari powers extend to correcting grave abuse of discretion on the part of an officer exercising judicial or quasi-judicial functions.55 However, the special civil action of certiorari is available only when there is no plain, speedy and adequate remedy in the ordinary course of law.56 Southern Cross relies on this limitation, stressing that Section 29 of the SMA is a plain, speedy and adequate remedy in the ordinary course of law which Philcemcor did not avail of. The Section reads: Section 29. Judicial Review.Any interested party who is adversely affected by the ruling of the Secretary in connection with the imposition of a safeguard measure may file with the CTA, a petition for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing of such

petition for review shall not in any way stop, suspend or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures, as the case may be. _______________

54 Rollo, p. 74. 55 See Section 1, Rule 65 in relation to Section 4, Rule 65, 1997 Rules of Civil Procedure. The original jurisdiction of the Court of Appeals over special civil actions for, inter alia, certiorari, is vested upon it in Section 9(1) of B.P. Blg. 129. This jurisdiction is concurrent with the Supreme Court and the Regional Trial Court. Atty. Paa v. Court of Appeals, 347 Phil. 122, 137; 282 SCRA 448, 461 (1997). 56 See Section 1, Rule 65, 1997 Rules of Civil Procedure. See also Building Care Corp. v. National Internal Labor Relations, 335 Phil. 1131, 1138; 268 SCRA 666, 674 (1997); Bernardo v. Court of Appeals, 341 Phil. 413, 425; 278 SCRA 782 (1997); BF Corporation v. Court of Appeals, 351 Phil. 507, 519; 288 SCRA 267 (1998); Tan v. Sandiganbayan, 354 Phil. 463, 469; 292 SCRA 452, 457 (1998). 83

VOL. 434, JULY 8, 2004 83 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings on tax matters to the Court of Appeals.57 (Emphasis supplied) It is not difficult to divine why the legislature singled out the CTA as the court with jurisdiction to review the ruling of the DTI Secretary in connection with the imposition of a safeguard measure. The Court has long recognized the legislative determination to vest sole and exclusive jurisdiction on matters

involving internal revenue and customs duties to such a specialized court.58 By the very nature of its function, the CTA is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject.59 At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a case should be clearly conferred and should not be deemed to exist on mere implication.60 Concededly, Rep. Act No. 1125, the statute creating the CTA, does not extend to it the power to review decisions of the DTI Secretary in connection with the imposition of safeguard measures.61 Of course, at that time which was before the advent of trade liberalization the notion of safeguard measures or safety nets was not yet in vogue. Undeniably, however, the SMA expanded the jurisdiction of the CTA by including review of the rulings of the DTI Secretary in connection with the imposition of safeguard measures. However, Philcemcor and the public respondents agree that the CTA has appellate jurisdiction over a decision of the DTI Secretary imposing _______________

57 Before the passage of RA No. 9282 on 30 March 2004, appeal from the decisions of the Court of Tax Appeals was to the Court of Appeals. 58 Secretary of Finance v. Agana, G.R. No. L-36276, 17 January 1975, 62 SCRA 68, 73. The CTA is a highly specialized body specifically created for the purpose of reviewing tax cases, Phil. Refining Co. v. Court of Appeals, 326 Phil. 680, 689; 256 SCRA 667 (1996); Commissioner of Internal Revenue v. Court of Appeals, 338 Phil. 322, 336; 271 SCRA 605 (1997). 59 Commissioner of Internal Revenue v. Court of Appeals, 363 Phil. 239, 246; 303 SCRA 614 (1999). 60 Philippine Ports Authority v. Fuentes, G.R. No. 91259, 16 April 1991, 195 SCRA 790, 796. 61 See Section 7, Rep. Act No. 1125. But see also Section 7, Rep. Act No. 9282. 84

84 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation a safeguard measure, but not when his ruling is not to impose such measure. In a related development, Rep. Act No. 9282, enacted on 30 March 2004, expressly vests unto the CTA jurisdiction over [d]ecisions of the Secretary of Trade and Industry, in case of nonagricultural product, commodity or article x x x involving x x x safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties.62 Had Rep. Act No. 9282 already been in force at the beginning of the incidents subject of this case, there would have been no need to make any deeper inquiry as to the extent of the CTAs jurisdiction. But as Rep. Act No. 9282 cannot be applied retroactively to the present case, the question of whether such jurisdiction extends to a decision not to impose a safeguard measure will have to be settled principally on the basis of the SMA. Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must be in connection with the imposition of a safeguard measure. The first two requisites are clearly present. The third requisite deserves closer scrutiny. Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary decides not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision. The reasons are as follows: First. Split jurisdiction is abhorred. Essentially, respondents position is that judicial review of the DTI Secretarys ruling is exercised by two different courts, depending on whether or not it imposes a safeguard measure, and in either case the court exercising jurisdiction does so to the exclusion of the other. Thus, if the DTI decision involves the imposition of a safeguard measure it is the CTA which has appellate jurisdiction; otherwise, it is the Court of Appeals. Such setup is as novel and unusual as it is cumbersome and unwise. Essentially, respondents advocate that Section 29 of the SMA has established split appellate

_______________

62See Section 7, Rep. Act No. 9282 (2004). 85

VOL. 434, JULY 8, 2004 85 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation jurisdiction over rulings of the DTI Secretary on the imposition of safeguard measure. This interpretation cannot be favored, as the Court has consistently refused to sanction split jurisdiction.63 The power of the DTI Secretary to adopt or withhold a safeguard measure emanates from the same statutory source, and it boggles the mind why the appeal modality would be such that one appellate court is qualified if what is to be reviewed is a positive determination, and it is not if what is appealed is a negative determination. In deciding whether or not to impose a safeguard measure, provisional or general, the DTI Secretary would be evaluating only one body of facts and applying them to one set of laws. The reviewing tribunal will be called upon to examine the same facts and the same laws, whether or not the determination is positive or negative. In short, if we were to rule for respondents we would be confirming the exercise by two judicial bodies of jurisdiction over basically the same subject matter precisely the split-jurisdiction situation which is anathema to the orderly administration of justice.64 The Court cannot accept that such was the legislative motive especially considering that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review without mention of any other court that may exercise corollary or ancillary jurisdiction in relation to the SMA. The provision refers to the Court of Appeals but only in regard to procedural rules and dispositions of appeals from the CTA to the Court of Appeals.65 The principle enunciated in Tejada v. Homestead Property Corporation66 is applicable to the case at bar:

The Court agrees with the observation of the [that] when an administrative agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its specializa_______________

63 See, e.g., ALU v. Gomez, 125 Phil. 717, 722; 19 SCRA 304, 309 (1967). 64 ALU v. Gomez, supra note 60; Atlas Consolidated v. Court of Appeals, G.R. No. 54305, February 14, 1990, 182 SCRA 166, 181. 65 Supra note 55. Also, before the enactment of R.A. No. 9282, decisions of the CTA were appealable to the Court of Appeals. 66 G.R. No. 79622, 29 September 1989, 178 SCRA 164. 86

86 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation tion are deemed to be included within the jurisdiction of said administrative agency or body. Split jurisdiction is not favored.67 Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate jurisdiction on the CTA. A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from reviewing a negative determination by the DTI Secretary nor conferred on the Court of Appeals such review authority. Respondents note, on the other hand, that neither did the law expressly grant to the CTA the power to review a negative determination. However, under the clear text of the law, the CTA is vested with jurisdiction to review the ruling of the DTI Secretary in connection with the imposition of a safeguard measure. Had the law been couched instead to incorporate the phrase the ruling imposing a safeguard measure, then respondents claim would have indisputable merit. Undoubtedly, the phrase in connection with not only

qualifies but clarifies the succeeding phrase imposition of a safeguard measure. As expounded later, the phrase also encompasses the opposite or converse ruling which is the non-imposition of a safeguard measure. In the American case of Shaw v. Delta Air Lines, Inc.,68 the United States Supreme Court, in interpreting a key provision of the Employee Retirement Security Act of 1974, construed the phrase relates to in its normal sense which is the same as if it has connection with or reference to.69 There is no serious dispute that the phrase in connection with is synonymous to relates to or reference to, and that all three phrases are broadly expansive. This is affirmed not just by jurisprudential fiat, but also the acquired connotative meaning of in connection with in common parlance. Consequently, with the use of the phrase in connection with, Section 29 allows the CTA to review not only the ruling imposing a safeguard measure, but all other rulings related or have reference to the application for such measure. _______________

67 Tejada v. Homestead Property Corporation, Id., at p. 168. 68 463 US 85 (1983). 69 Id. at 96-97 (1983), citing Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 US 689, 695 (1933); and Blacks Law Dictionary 1158 (5th ed. 1979), which states Relate. To stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with. 87

VOL. 434, JULY 8, 2004 87 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Now, let us determine the maximum scope and reach of the phrase in connection with as used in Section 29 of the SMA. A literalist reading or linguistic survey may not satisfy. Even the US Supreme Court in New York State Blue Cross Plans v. Travelers Ins.70 conceded that the phrases relate to

or in connection with may be extended to the farthest stretch of indeterminacy for, universally, relations or connections are infinite and stop nowhere.71 Thus, in the case the US High Court, examining the same phrase of the same provision of law involved in Shaw, resorted to looking at the statute and its objectives as the alternative to an uncritical literalism.72 A similar inquiry into the other provisions of the SMA is in order to determine the scope of review accorded therein to the CTA.73 The authority to decide on the safeguard measure is vested in the DTI Secretary in the case of non-agricultural products, and in the Secretary of the Department of Agriculture in the case of agricultural products.74 Section 29 is likewise explicit that only the rulings of the DTI Secretary or the Agriculture Secretary may be reviewed by the CTA.75 Thus, the acts of other bodies that were granted some powers by the SMA, such as the Tariff Commission, are not subject to direct review by the CTA. Under the SMA, the Department Secretary concerned is authorized to decide on several matters. Within thirty (30) days from receipt of a petition seeking the imposition of a safeguard measure, or from the date he made motu proprio initiation, the Secretary shall make a preliminary determination on whether the increased imports of the product under consideration substantially cause or _______________

70 514 US 645 (1995). 71 Id., at p. 656. 72 Id., at p. 656. See also Egelhoff v. Egelhoff, 000 U.S. 99-1529 (2001). 73 Courts must give effect to the general legislative intent that can be discovered from or is unraveled by the four corners of the statute, and in order to discover said intent, the whole statute, and not only a particular provision thereof, should be considered. Commissioner of Internal Revenue v. TMX Sales, G.R. No. 83736, 15 January 1992, 205 SCRA 184, 188, citing Manila Lodge No. 761 vs. Court of Appeals, 73 SCRA 162 (1976). 74 See Section 4(n), Chapter I, Rep. Act No. 8800. 75 See Section 29, Rep. Act No. 8800, infra, in relation to Section 4(n), Chapter I, Rep. Act No. 8800.

88

88 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation threaten to cause serious injury to the domestic industry.76 Such ruling is crucial since only upon the Secretarys positive preliminary determination that a threat to the domestic industry exists shall the matter be referred to the Tariff Commission for formal investigation, this time, to determine whether the general safeguard measure should be imposed or not.77 Pursuant to a positive preliminary determination, the Secretary may also decide that the imposition of a provisional safeguard measure would be warranted under Section 8 of the SMA.78 The Secretary is also authorized to decide, after receipt of the report of the Tariff Commission, whether or not to impose the general safeguard measure, and if in the affirmative, what general safeguard measures should be applied.79 Even after the general safeguard measure is imposed, the Secretary is empowered to extend the safeguard measure,80 or terminate, reduce or modify his previous rulings on the general safeguard measure.81 With the explicit grant of certain powers involving safeguard measures by the SMA on the DTI Secretary, it follows that he is empowered to rule on several issues. These are the issues which arise in connection with, or in relation to, the imposition of a safeguard measure. They may arise at different stagesthe preliminary investigation stage, the post-formal investigation stage, or the postsafeguard measure stageyet all these issues do become ripe for resolution because an initiatory action has been taken seeking the imposition of a safeguard measure. It is the initiatory action for the imposition of a safeguard measure that sets the wheels in motion, allowing the Secretary to make successive rulings, beginning with the preliminary determination. Clearly, therefore, the scope and reach of the phrase in connection with, as intended by Congress, pertain to all rulings of the DTI Secretary or Agriculture Secretary which arise from the time an application or motu proprio initiation for the imposition of a safeguard measure is taken. Indeed, the incidents which require resolution come to the fore only because there _______________

76 Section 7, Rep. Act No. 8800. 77 Ibid. 78 Section 8, Rep. Act No. 8800. 79 Id., at Sec. 13. 80 Id., at Sec. 19. 81 Id., at Sec. 18. 89

VOL. 434, JULY 8, 2004 89 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation is an initial application or action seeking the imposition of a safeguard measure. From the legislative standpoint, it was a matter of sense and practicality to lump up the questions related to the initiatory application or action for safeguard measure and to assign only one court and; that is the CTA to initially review all the rulings related to such initiatory application or action. Both directions Congress put in place by employing the phrase in connection with in the law. Given the relative expanse of decisions subject to judicial review by the CTA under Section 29, we do not doubt that a negative ruling refusing to impose a safeguard measure falls within the scope of its jurisdiction. On a literal level, such negative ruling is a ruling of the Secretary in connection with the imposition of a safeguard measure, as it is one of the possible outcomes that may result from the initial application or action for a safeguard measure. On a more critical level, the rulings of the DTI Secretary in connection with a safeguard measure, however diverse the outcome may be, arise from the same grant of jurisdiction on the DTI Secretary by the SMA.82 The refusal by the DTI Secretary to grant a safeguard measure involves the same grant of authority, the same statutory prescriptions, and the same degree of discretion as the imposition by the DTI Secretary of a safeguard measure.

The position of the respondents is one of uncritical literalism83 incongruent with the animus of the law. Moreover, a fundamentalist approach to Section 29 is not warranted, considering the absurdity of the consequences. Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.84 Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a negative ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would cause inconvenience and absurdity.85 Adopting the respondents position favoring the CTAs minimal jurisdiction would unnecessarily lead to illogical and onerous results. _______________

82 Accord Tejada, supra note 61. 83 Supra note 66. 84 Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to be adopted. 85 Commissioner of Internal Revenue v. TMX Sales, supra note 66. 90

90 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Indeed, it is illiberal to assume that Congress had intended to provide appellate relief to rulings imposing a safeguard measure but not to those declining to impose the measure. Respondents might argue that the right to relief from a negative ruling is not lost since the applicant could, as Philcemcor did, question such ruling through a special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, in lieu of an appeal to the CTA. Yet these two reliefs are of differing natures and gravamen. While an appeal may be predicated on errors of fact or errors of law, a special civil action for certiorari

is grounded on grave abuse of discretion or lack of or excess of jurisdiction on the part of the decider. For a special civil action for certiorari to succeed, it is not enough that the questioned act of the respondent is wrong. As the Court clarified in Sempio v. Court of Appeals: A tribunal, board or officer acts without jurisdiction if it/he does not have the legal power to determine the case. There is excess of jurisdiction where, being clothed with the power to determine the case, the tribunal, board or officer oversteps its/his authority as determined by law. And there is grave abuse of discretion where the tribunal, board or officer acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of his judgment as to be said to be equivalent to lack of jurisdiction. Certiorari is often resorted to in order to correct errors of jurisdiction. Where the error is one of law or of fact, which is a mistake of judgment, appeal is the remedy.86 It is very conceivable that the DTI Secretary, after deliberate thought and careful evaluation of the evidence, may either make a negative preliminary determination as he is so empowered under Section 7 of the SMA, or refuse to adopt the definitive safeguard measure under Section 13 of the same law. Adopting the respondents theory, this negative ruling is susceptible to reversal only through a special civil action for certiorari, thus depriving the affected party the chance to elevate the ruling on appeal on the rudimentary grounds of errors in fact or in law. Instead, and despite whatever indications that the DTI Secretary acted with measure and within the bounds of his jurisdiction are, the aggrieved party will be forced to resort to a gymnastic exercise, contorting the straight and narrow in an effort to discombobulate the _______________

86 Sempio v. Court of Appeals, 331 Phil. 912, 922-923; 263 SCRA 617, 624 (1996). 91

VOL. 434, JULY 8, 2004 91

Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation courts into believing that what was within was actually beyond and what was studied and deliberate actually whimsical and capricious. What then would be the remedy of the party aggrieved by a negative ruling that simply erred in interpreting the facts or the law? It certainly cannot be the special civil action for certiorari, for as the Court held in Silverio v. Court of Appeals: Certiorari is a remedy narrow in its scope and inflexible in its character. It is not a general utility tool in the legal workshop.87 Fortunately, this theoretical quandary need not come to pass. Section 29 of the SMA is worded in such a way that it places under the CTAs judicial review all rulings of the DTI Secretary, which are connected with the imposition of a safeguard measure. This is sound and proper in light of the specialized jurisdiction of the CTA over tax matters. In the same way that a question of whether to tax or not to tax is properly a tax matter, so is the question of whether to impose or not to impose a definitive safeguard measure. On another note, the second paragraph of Section 29 similarly reveals the legislative intent that rulings of the DTI Secretary over safeguard measures should first be reviewed by the CTA and not the Court of Appeals. It reads: The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings on tax matters to the Court of Appeals. This is the only passage in the SMA in which the Court of Appeals is mentioned. The express wish of Congress is that the petition conform to the requirements and procedure under Rule 43 of the Rules of Civil Procedure. Since Congress mandated that the form and procedure adopted be analogous to a review of a CTA ruling by the Court of Appeals, the legislative contemplation could not have been that the appeal be directly taken to the Court of Appeals. _______________

87 Silverio v. Court of Appeals, 225 Phil. 459, 474; 141 SCRA 527, 541 (1986), citing State v. Dawson, 325 S.W. 97. 99. See also San Miguel Foods, Inc. v. Hon. Laguesma, 331 Phil. 356, 376; 263 SCRA 68, 84-85 (1996).

92

92 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Issue of Binding Effect of Tariff Commissions Factual Determination on DTI Secretary. The next issue for resolution is whether the factual determination made by the Tariff Commission under the SMA is binding on the DTI Secretary. Otherwise stated, the question is whether the DTI Secretary may impose general safeguard measures in the absence of a positive final determination by the Tariff Commission. The Court of Appeals relied upon Section 13 of the SMA in ruling that the findings of the Tariff Commission do not necessarily constitute a final decision. Section 13 details the procedure for the adoption of a safeguard measure, as well as the steps to be taken in case there is a negative final determination. The implication of the Court of Appeals holding is that the DTI Secretary may adopt a definitive safeguard measure, notwithstanding a negative determination made by the Tariff Commission. Undoubtedly, Section 13 prescribes certain limitations and restrictions before general safeguard measures may be imposed. However, the most fundamental restriction on the DTI Secretarys power in that respect is contained in Section 5 of the SMAthat there should first be a positive final determination of the Tariff Commissionwhich the Court of Appeals curiously all but ignored. Section 5 reads: Sec. 5. Conditions for the Application of General Safeguard Measures.The Secretary shall apply a general safeguard measure upon a positive final determination of the [Tariff] Commission that a product is being imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in the case of non-agricultural

products, the Secretary shall first establish that the application of such safeguard measures will be in the public interest. (emphasis supplied) The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a positive final determination. This power lodged in the Tariff Commission, must be distin93

VOL. 434, JULY 8, 2004 93 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation guished from the power to impose the general safeguard measure which is properly vested on the DTI Secretary.88 All in all, there are two condition precedents that must be satisfied before the DTI Secretary may impose a general safeguard measure on grey Portland cement. First, there must be a positive final determination by the Tariff Commission that a product is being imported into the country in increased quantities (whether absolute or relative to domestic production), as to be a substantial cause of serious injury or threat to the domestic industry. Second, in the case of non-agricultural products the Secretary must establish that the application of such safeguard measures is in the public interest.89 As Southern Cross argues, Section 5 is quite clear-cut, and it is impossible to finagle a different conclusion even through overarching methods of statutory construction. There is no safer nor better settled canon of interpretation that when language is clear and unambiguous it must be held to mean what it plainly expresses:90 In the quotable words of an illustrious member of this Court, thus: [I]f a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The verba legis or plain meaning rule rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute.91

_______________

88 The distinction must also be laid between the power of the DTI Secretary to impose a provisional safeguard measure under Section 8 of the SMA and a general safeguard measure under Section 13. Under Section 8, the decision to impose a provisional safeguard measure is clearly within the sole discretion of the DTI Secretary, without need to take into account what other governmental agencies may say. Yet under Section 13, in relation to Section 8 of the SMA, the decision by the DTI Secretary to impose the general safeguard measure is indubitably predicated on a positive final determination by the Tariff Commission. 89 Section 5, Rep. Act No. 8800. 90 Sutherland, Statutes and Statutory Construction, Vol. 2A, 5th ed., p. 81 (1973). 91 Republic v. Court of Appeals, G.R. Nos. 103882 & 105276, 25 November 1998, 299 SCRA 199, 270-271, J. Puno, concurring. See also Globe-Mackay Cable and Radio Corp. v. National Internal Labor Relations, G.R. 94

94 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Moreover, Rule 5 of the Implementing Rules and Regulations of the SMA,92 which interprets Section 5 of the law, likewise requires a positive final determination on the part of the Tariff Commission before the application of the general safeguard measure. The SMA establishes a distinct allocation of functions between the Tariff Commission and the DTI Secretary. The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a positive final determination. This power, which belongs to the Tariff Commission, must be distinguished from the power to impose general safeguard measure properly

vested on the DTI Secretary. The distinction is vital, as a positive final determination clearly antecedes, as a condition precedent, the imposition of a general safeguard measure. At the same time, a positive final determination does not necessarily result in the imposition of a general safeguard measure. Under Section 5, notwithstanding the positive final determination of the Tariff Commission, the DTI Secretary is tasked to decide whether or not that the application of the safeguard measures is in the public interest. It is also clear from Section 5 of the SMA that the positive final determination to be undertaken by the Tariff Commission does not entail a mere gathering of statistical data. In order to arrive at such determination, it has to establish causal linkages from the statistics that it compiles and evaluates: after finding there is an importation in increased quantities of the product in question, that such importation is a substantial cause of serious threat or injury to the domestic industry. The Court of Appeals relies heavily on the legislative record of a congressional debate during deliberations on the SMA to assert a purported legislative intent that the findings of the Tariff Commission do not bind the DTI Secretary.93 Yet as explained earlier, the _______________

No. 82511, 3 March 1992, 206 SCRA 701, 711, citing R. AGPALO, STATUTORY CONSTRUCTION, p. 94 (1990); Victoria v. Commission on Elections, G.R. No. 109005, 10 January 1994, 229 SCRA 269, 273; Supt. Fianza v. PLEB, G.R. Nos. 109638 & 109639, 31 March 1995, 243 SCRA 165, 178. 92 Joint Administrative Order No. 03-00, promulgated on 9 August 2000, and signed by the then Secretaries of Trade and Industry, Agriculture and Finance, as well as the Commissioner of the Bureau of Customs and the Chairman of the Tariff Commission. 93 See Rollo, pp. 81-82. 95

VOL. 434, JULY 8, 2004 95

Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation plain meaning of Section 5 emphasizes that only if the Tariff Commission renders a positive determination could the DTI Secretary impose a safeguard measure. Resort to the congressional records to ascertain legislative intent is not warranted if a statute is clear, plain and free from ambiguity. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute.94 Indeed, the legislative record, if at all to be availed of, should be approached with extreme caution, as legislative debates and proceedings are powerless to vary the terms of the statute when the meaning is clear.95 Our holding in Civil Liberties Union v. Executive Secretary96 on the resort to deliberations of the constitutional convention to interpret the Constitution is likewise appropriate in ascertaining statutory intent: While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other guides fail as said proceedings are powerless to vary the terms of the Constitution when the meaning is clear. Debates in the constitutional convention are of value as showing the views of the individual members, and as indicating the reasons for their votes, but they give us no light as to the views of the large majority who did not talk x x x. We think it safer to construe the constitution from what appears upon its face.97 Moreover, it is easy to selectively cite passages, sometimes out of their proper context, in order to assert a misleading interpretation. The effect can be dangerous. Minority or solitary views, anecdotal ruminations, or even the occasional crude witticisms, may improperly acquire the mantle of legislative intent by the sole virtue of their publication in the authoritative congressional record. Hence, resort to legislative deliberations is allowable when the statute is crafted in such a manner as to leave room for doubt on the real intent of the legislature. _______________

94 Supra note 91.

95 See Civil Liberties Union v. Executive Secretary, G.R. Nos. 83896 & 83815, 22 February 1991, 194 SCRA 317, 337. 96 Ibid. 97 Id., at p. 337. 96

96 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Section 5 plainly evinces legislative intent to restrict the DTI Secretarys power to impose a general safeguard measure by pre-conditioning such imposition on a positive determination by the Tariff Commission. Such legislative intent should be given full force and effect, as the executive power to impose definitive safeguard measures is but a delegated powerthe power of taxation, by nature and by command of the fundamental law, being a preserve of the legislature.98 Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative power, yet ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this power: The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.99 The safeguard measures which the DTI Secretary may impose under the SMA may take the following variations, to wit: (a) an increase in, or imposition of any duty on the imported product; (b) a decrease in or the imposition of a tariff-rate quota on the product; (c) a modification or imposition of any quantitative restriction on the importation of the product into the Philippines; (d) one or more appropriate adjustment measures, including the provision of trade adjustment assistance; and (e) any combination of the above-described actions. Except for the provision of trade adjustment assistance, the measures enumerated by the SMA are essentially imposts, which precisely are the

subject of delegation Constitution.100 _______________

under

Section

28(2),

Article

VI

of

the

1987

98 See Section 24, Article VI, Constitution. The power of taxation being legislative, all the incidents are within the control of the Legislature. Sarasola v. Trinidad, 40 Phil. 252, 263 (1919), citing Genet v. City of Brooklyn (1885), 99 N.Y., 296. See also National Dental Supply v. Meer, 90 Phil. 265, 268-269 (1951); Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan, 161 Phil. 591, 600; 69 SCRA 460 (1976). 99 Article VI, Section 28 (2), 1987 Constitution. See Section 13, Rep. Act No. 8800. 100 Thus, our fundamental also distinguishes between taxes, on the one hand, and impoststhat is to say, tariff rates or duties imposed for the importation of goodson the other. Procter & Gamble Phil. Mfg. Corp. v. Comm. of Customs, 132 Phil. 169, 175; 23 SCRA 691, 697 (1968). 97

VOL. 434, JULY 8, 2004 97 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation This delegation of the taxation power by the legislative to the executive is authorized by the Constitution itself.101 At the same time, the Constitution also grants the delegating authority (Congress) the right to impose restrictions and limitations on the taxation power delegated to the President.102 The restrictions and limitations imposed by Congress take on the mantle of a constitutional command, which the executive branch is obliged to observe. The SMA empowered the DTI Secretary, as alter ego of the President,103 to impose definitive general safeguard measures, which basically are tariff imposts of the type spoken of in the Constitution. However, the law did not grant him full, uninhibited discretion to impose such measures. The DTI

Secretary authority is derived from the SMA; it does not flow from any inherent executive power. Thus, the limitations imposed by Section 5 are absolute, warranted as they are by a constitutional fiat.104 Philcemcor cites our 1912 ruling in Lamb v. Phipps105 to assert that the DTI Secretary, having the final decision on the safeguard measure, has the power to evaluate the findings of the Tariff Commission and make an independent judgment thereon. Given the constitutional and statutory limitations governing the present case, the citation is misplaced. Lamb pertained to the discretion of the Insular Auditor of the Philippine Islands, whom, as the Court recognized, [t]he statutes of the United States require[d] x x x to exercise his judgment upon the legality x x x [of] provisions of law _______________

101 As opined by Justice Irene Cortes, the indubitable authority in Administrative Law, Where the Constitution itself authorizes the delegation there can obviously be no objection to it provided the constitutional conditions are met. I. Cortes, Philippine Administrative Law: Cases and Materials 12 (1963). 102 Supra note 99. 103 Without minimizing the importance of the heads of the various departments, their personality is in reality but the projection of that of the President. Stated otherwise, and as forcibly characterized by Chief Justice Taft of the Supreme Court of the United States, each head of a department is, and must be, the Presidents alter ego in the matters of that department where the President is required by law to exercise authority Villena v. Secretary of Interior, 67 Phil. 451, 464 (1939). 104 Supra note 89. 105 22 Phil. 456 (1912). 98

98 SUPREME COURT REPORTS ANNOTATED

Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation and resolutions of Congress providing for the payment of money, the means of procuring testimony upon which he may act.106 Thus in Lamb, while the Court recognized the wide latitude of discretion that may have been vested on the Insular Auditor, it also recognized that such latitude flowed from, and is consequently limited by, statutory grant. However, in this case, the provision of the Constitution in point expressly recognizes the authority of Congress to prescribe limitations in the case of tariffs, export/import quotas and other such safeguard measures. Thus, the broad discretion granted to the Insular Auditor of the Philippine Islands cannot be analogous to the discretion of the DTI Secretary which is circumscribed by Section 5 of the SMA. For that matter, Cario v. Commissioner on Human Rights,107 likewise cited by Philcemcor, is also inapplicable owing to the different statutory regimes prevailing over that case and the present petition. In Cario, the Court ruled that the constitutional power of the Commission on Human Rights (CHR) to investigate human rights violations did not extend to adjudicating claims on the merits.108 Philcemcor claims that the functions of the Tariff Commission being only investigatory, it could neither decide nor adjudicate.109 The applicable law governing the issue in Cario is Section 18, Article XIII of the Constitution, which delineates the powers and functions of the CHR. The provision does not vest on the CHR the power to adjudicate cases, but only to investigate all forms of human rights violations.110 Yet, without modifying the thorough disquisition of the Court in Cario on the general limitations on the _______________

106 Lamb v. Phipps, 22 Phil. 456, 480 (1912). The statutory authority cited by the Court in Lambs is Rev. Stat. of U.S., secs. 184, 187, 269, 277. 107 G.R. No. 96681, 2 December 1991, 204 SCRA 483. 108 Id., at p. 496. 109 The functions of the Tariff Commission are traditionally investigatory. For example, both the law that created the Tariff Commission and the Tariff and

Customs Code mandate the Commission to investigate, among others, the administration, fiscal and industrial effects of the tariff laws of this country. See Section 5, Rep. Act No. 911 & Section 505, Rep. Act No. 1937. Even in the SMA, the process by which the Tariff Commission arrives at its determination is denominated as a formal investigation. 110 See Section 18 (1), Article XIII, Constitution. 99

VOL. 434, JULY 8, 2004 99 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation investigatory power, the precedent is inapplicable because of the difference in the involved statutory frameworks. The Constitution does not repose binding effect on the results of the CHRs investigation.111 On the other hand, through Section 5 of the SMA and under the authority of Section 28(2), Article VI of the Constitution, Congress did intend to bind the DTI Secretary to the determination made by the Tariff Commission.112 It is of no consequence that such determination results from the exercise of investigatory powers by the Tariff Commission since Congress is well within its constitutional mandate to limit the authority of the DTI Secretary to impose safeguard measures in the manner that it sees fit. The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and Rule 13 of the SMAs Implementing Rules in support of the view that the DTI Secretary may decide independently of the determination made by the Tariff Commission. Admittedly, there are certain infelicities in the language of Section 13 and Rule 13. But reliance should not be placed on the textual imprecisions. Rather, Section 13 and Rule 13 must be viewed in light of the fundamental prescription imposed by Section 5. 113 Section 13 of the SMA lays down the procedure to be followed after the Tariff Commission renders its report. The provision reads in full:

SEC. 13. Adoption of Definitive Measures.Upon its positive determination, the Commission shall recommend to the Secretary an appropriate definitive measure, in the form of: (a) An increase in, or imposition of, any duty on the imported product; (b) A decrease in or the imposition of a tariff-rate quota (MAV) on the product; _______________

111 Constitutional Commissioner Fr. Joaquin Bernas, citing the Record of the 1986 Constitutional Commission, says that for the prosecution of human rights violations, the CHR would have to rely on the appropriate government agencies such as the Fiscals Office. J. Bernas, The Intent of the 1986 Constitution Writers 1014 (1995), citing IV Record of the Constitutional Commission: Proceedings and Debates 712. 112 Supra notes 89 and 99. 113 Ironically, the Court of Appeals invokes the doctrine that a statute must be construed as to harmonize and give effect to all its provisions whenever possible, see Rollo, p. 79, while failing to take into account Section 5 of Rep. Act No. 8800. 100

100 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation (c) A modification or imposition of any quantitative restriction on the importation of the product into the Philippines; (d) One or more appropriate adjustment measures, including the provision of trade adjustment assistance; (e) Any combination of actions described in subparagraphs (a) to (d).

The Commission may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the product, to alleviate the injury or threat thereof to the domestic industry, and to facilitate positive adjustment to import competition. The general safeguard measure shall be limited to the extent of redressing or preventing the injury and to facilitate adjustment by the domestic industry from the adverse effects directly attributed to the increased imports: Provided, however, That when quantitative import restrictions are used, such measures shall not reduce the quantity of imports below the average imports for the three (3) preceding representative years, unless clear justification is given that a different level is necessary to prevent or remedy a serious injury. A general safeguard measure shall not be applied to a product originating from a developing country if its share of total imports of the product is less than three percent (3%): Provided, however, That developing countries with less than three percent (3%) share collectively account for not more than nine percent (9%) of the total imports. The decision imposing a general safeguard measure, the duration of which is more than one (1) year, shall be reviewed at regular intervals for purposes of liberalizing or reducing its intensity. The industry benefiting from the application of a general safeguard measure shall be required to show positive adjustment within the allowable period. A general safeguard measure shall be terminated where the benefiting industry fails to show any improvement, as may be determined by the Secretary. The Secretary shall issue a written instruction to the heads of the concerned government agencies to implement the appropriate general safeguard measure as determined by the Secretary within fifteen (15) days from receipt of the report. In the event of a negative final determination, or if the cash bond is in excess of the definitive safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder thereof, as the case may be, previously collected as provisional general safeguard measure within ten (10) days from the date a final decision has been made: Provided, That the government shall not be liable for any interest on the amount to be returned. The Secretary shall 101

VOL. 434, JULY 8, 2004 101 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation not accept for consideration another petition from the same industry, with respect to the same imports of the product under consideration within one (1) year after the date of rendering such a decision. When the definitive safeguard measure is in the form of a tariff increase, such increase shall not be subject or limited to the maximum levels of tariff as set forth in Section 401(a) of the Tariff and Customs Code of the Philippines. To better comprehend Section 13, note must be taken of the distinction between the investigatory and recommendatory functions of the Tariff Commission under the SMA. The word determination, as used in the SMA, pertains to the factual findings on whether there are increased imports into the country of the product under consideration, and on whether such increased imports are a substantial cause of serious injury or threaten to substantially cause serious injury to the domestic industry.114 The SMA explicitly authorizes the DTI Secretary to make a preliminary determination,115 and the Tariff Commission to make the final determination.116 The distinction is fundamental, as these functions are not interchangeable. The Tariff Commission makes its determination only after a formal investigation process, with such investigation initiated only if there is a positive preliminary determination by the DTI Secretary under Section 7 of the SMA.117 On the other hand, the DTI Secretary may impose definitive safeguard measure only if there is a positive final determination made by the Tariff Commission.118 In contrast, a recommendation is a suggested remedial measure submitted by the Tariff Commission under Section 13 after making a positive final determination in accordance with Section 5. The Tariff Commission is not empowered to make a recommendation absent a positive final determination on its part.119 Under Section 13, the Tariff Commission is required to recommend to the _______________

114 See Sections 5, 7, 8, 12 & 13, Rep. Act No. 8800. 115 Section 7, Rep. Act No. 8800. 116 Section 5, Rep. Act No. 8800. 117 See also Section 9, Rep. Act No. 8800. 118 Supra note 89. 119 Section 13, Rep. Act No. 8800. 102

102 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation [DTI] Secretary an appropriate definitive measure.120 The Tariff Commission may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the products, to alleviate the injury or threat thereof to the domestic industry and to facilitate positive adjustment to import competition.121 The recommendations of the Tariff Commission, as rendered under Section 13, are not obligatory on the DTI Secretary. Nothing in the SMA mandates the DTI Secretary to adopt the recommendations made by the Tariff Commission. In fact, the SMA requires that the DTI Secretary establish that the application of such safeguard measures is in the public interest, notwithstanding the Tariff Commissions recommendation on the appropriate safeguard measure based on its positive final determination.122 The nonbinding force of the Tariff Commissions recommendations is congruent with the command of Section 28(2), Article VI of the 1987 Constitution that only the President may be empowered by the Congress to impose appropriate tariff rates, import/export quotas and other similar measures.123 It is the DTI Secretary, as alter ego of the President, who under the SMA may impose such safeguard measures subject to the limitations imposed therein. A contrary conclusion would in essence unduly arrogate to the Tariff Commission the executive power to

impose the appropriate tariff measures. That is why the SMA empowers the DTI Secretary to adopt safeguard measures other than those recommended by the Tariff Commission. Unlike the recommendations of the Tariff Commission, its determination has a different effect on the DTI Secretary. Only on the basis of a positive final determination made by the Tariff Commission under Section 5 can the DTI Secretary impose a general safeguard measure. Clearly, then the DTI Secretary is bound by the determination made by the Tariff Commission. _______________

120 Upon its positive determination, the Commission shall recommend to the Secretary an appropriate definitive measure x x x. Supra note 89. 121 Section 13, Rep. Act No. 8800. 122 See Section 5, Rep. Act No. 8800, in relation to Section 13, Rep. Act No. 8800. 123 Supra note 99. 103

VOL. 434, JULY 8, 2004 103 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Some confusion may arise because the sixth paragraph of Section 13124 uses the variant word determined in a different context, as it contemplates the appropriate general safeguard measure as determined by the Secretary within fifteen (15) days from receipt of the report. Quite plainly, the word determined in this context pertains to the DTI Secretarys power of choice of the appropriate safeguard measure, as opposed to the Tariff Commissions power to determine the existence of conditions necessary for the imposition of any safeguard measure. In relation to Section 5, such choice also relates to the mandate of the DTI Secretary to establish that the application of safeguard measures is in the public interest, also within the fifteen (15) day period.

Nothing in Section 13 contradicts the instruction in Section 5 that the DTI Secretary is allowed to impose the general safeguard measures only if there is a positive determination made by the Tariff Commission. Unfortunately, Rule 13.2 of the Implementing Rules of the SMA is captioned Final Determination by the Secretary. The assailed Decision and Philcemcor latch on this phraseology to imply that the factual determination rendered by the Tariff Commission under Section 5 may be amended or reversed by the DTI Secretary. Of course, implementing rules should conform, not clash, with the law that they seek to implement, for a regulation which operates to create a rule out of harmony with the statute is a nullity.125 Yet imperfect draftsmanship aside, nothing in Rule 13.2 implies that the DTI Secretary can set aside the determination made by the Tariff Commission under the aegis of Section 5. This can be seen by examining the specific provisions of Rule 13.2, thus: _______________

124 The Secretary shall issue a written instruction to the heads of the concerned government agencies to implement the appropriate general safeguard measure as determined by the Secretary within fifteen (15) days from receipt of the report. 125 Regidor v. Chiongbian, G.R. No. 85815, 19 May 1989, 173 SCRA 507, 512; citing Commissioner of Internal Revenue v. Vda. de Prieto, L-13912, September 30, 1950. A rule or regulation that was issued to implement a law may not go beyond the terms and provisions of the law. Regidor v. Chiongbian, Id.; citing People v. Lim, 108 Phil. 1091. 104

104 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation RULE 13.2. Final Determination by the Secretary

RULE 13.2.a. Within fifteen (15) calendar days from receipt of the Report of the Commission, the Secretary shall make a decision, taking into consideration the measures recommended by the Commission. RULE 13.2.b. If the determination is affirmative, the Secretary shall issue, within two (2) calendar days after making his decision, a written instruction to the heads of the concerned government agencies to immediately implement the appropriate general safeguard measure as determined by him. Provided, however, that in the case of non-agricultural products, the Secretary shall first establish that the imposition of the safeguard measure will be in the public interest. RULE 13.2.c. Within two (2) calendar days after making his decision, the Secretary shall also order its publication in two (2) newspapers of general circulation. He shall also furnish a copy of his Order to the petitioner and other interested parties, whether affirmative or negative. (Emphasis supplied.) Moreover, the DTI Secretary does not have the power to review the findings of the Tariff Commission for it is not subordinate to the Department of Trade and Industry (DTI). It falls under the supervision, not of the DTI nor of the Department of Finance (as mistakenly asserted by Southern Cross),126 but of the National Economic Development Authority, an independent planning agency of the government of co-equal rank as the DTI.127 As the supervision and control of a Department Secretary is limited to the bureaus, offices, and agencies under him,128 the DTI Secretary generally cannot exercise review authority over actions of the Tariff Commission. Neither does the SMA specifically authorize the DTI Secretary to alter, amend or modify in any way the determination made by the Tariff Commission. The most that the DTI Secretary could do to express displeasure over the Tariff Commissions actions is to ignore its recommendation, but not its determination. _______________

126 Rollo, p. 1323, citing a provision of the repealed Revised Administrative Code. 127 See Sections 2 & 16, Chapter I, Subtitle C, Title II, Book V, Administrative Code of 1987. The supervision exercised by the NEDA over the Tariff

Commission is administrative in nature. See Section 38(2), Chapter 7, Book IV, Administrative Code of 1987. 128 Section 39, Chapter 8, Book IV, Administrative Code of 1987. 105

VOL. 434, JULY 8, 2004 105 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation The word determination as used in Rule 13.2 of the Implementing Rules is dissonant with the same word as employed in the SMA, which in the latter case is undeviatingly in reference to the determination made by the Tariff Commission. Beyond the resulting confusion, however, the divergent use in Rule 13.2 is explicable as the Rule textually pertains to the power of the DTI Secretary to review the recommendations of the Tariff Commission, not the latters determination. Indeed, an examination of the specific provisions show that there is no real conflict to reconcile. Rule 13.2 respects the logical order imposed by the SMA. The Rule does not remove the essential requirement under Section 5 that a positive final determination be made by the Tariff Commission before a definitive safeguard measure may be imposed by the DTI Secretary. The assailed Decision characterizes the findings of the Tariff Commission as merely recommendatory and points to the DTI Secretary as the authority who renders the final decision.129 At the same time, Philcemcor asserts that the Tariff Commissions functions are merely investigatory, and as such do not include the power to decide or adjudicate. These contentions, viewed in the context of the fundamental requisite set forth by Section 5, are untenable. They run counter to the statutory prescription that a positive final determination made by the Tariff Commission should first be obtained before the definitive safeguard measures may be laid down. Was it anomalous for Congress to have provided for a system whereby the Tariff Commission may preclude the DTI, an office of higher rank, from imposing a safeguard measure? Of course, this Court does not inquire into the wisdom of the legislature but only charts the boundaries of powers and

functions set in its enactments. But then, it is not difficult to see the internal logic of this statutory framework. For one, as earlier stated, the DTI cannot exercise review powers over the Tariff Commission which is not its subordinate office. Moreover, the mechanism established by Congress establishes a measure of check and balance involving two different governmental agencies with disparate specializations. The matter of safeguard measures is of such national importance that a decision _______________

129 Rollo, p. 80. 106

106 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation either to impose or not to impose then could have ruinous effects on companies doing business in the Philippines. Thus, it is ideal to put in place a system which affords all due deliberation and calls to fore various governmental agencies exercising their particular specializations. Finally, if this arrangement drawn up by Congress makes it difficult to obtain a general safeguard measure, it is because such safeguard measure is the exception, rather than the rule. The Philippines is obliged to observe its obligations under the GATT, under whose framework trade liberalization, not protectionism, is laid down. Verily, the GATT actually prescribes conditions before a member-country may impose a safeguard measure. The pertinent portion of the GATT Agreement on Safeguards reads: 2. A Member may only apply a safeguard measure to a product only if that member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to

cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.130 3. (a) A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article X of the GATT 1994. This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law.131 The SMA was designed not to contradict the GATT, but to complement it. The two requisites laid down in Section 5 for a positive final determination are the same conditions provided under the GATT Agreement on Safeguards for the application of safeguard measures by a member country. Moreover, the investigatory procedure laid down by the SMA conforms to the procedure required by the GATT Agreement on Safeguards. Congress has chosen the _______________

130 Section II(2), GATT Agreement on Safeguards. 131 Section II(3)(a), GATT Agreement on Safeguards. 107

VOL. 434, JULY 8, 2004 107 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation Tariff Commission as the competent authority to conduct such investigation. Southern Cross stresses that applying the provision of the GATT Agreement on Safeguards, the Tariff Commission is clearly empowered to arrive at binding

conclusions.132 We agree: binding on the DTI Secretary is the Tariff Commissions determinations on whether a product is imported in increased quantities, absolute or relative to domestic production and whether any such increase is a substantial cause of serious injury or threat thereof to the domestic industry.133 Satisfied as we are with the proper statutory paradigm within which the SMA should be analyzed, the flaws in the reasoning of the Court of Appeals and in the arguments of the respondents become apparent. To better understand the dynamics of the procedure set up by the law leading to the imposition of definitive safeguard measures, a brief step-by-step recount thereof is in order. 1. After the initiation of an action involving a general safeguard measure,134 the DTI Secretary makes a preliminary determination whether the increased imports of the product under consideration substantially cause or threaten to substantially cause serious injury to the domestic industry,135 and whether the imposition of a provisional measure is warranted under Section 8 of the SMA.136 If the preliminary determination is negative, it is implied that no further action will be taken on the application. 2. When his preliminary determination is positive, the Secretary immediately transmits the records covering the application to the Tariff Commission for immediate formal investigation.137 3. The Tariff Commission conducts its formal investigation, keyed towards making a final determination. In the process, it holds public hearings, providing interested parties the opportunity to present evidence or otherwise be heard.138 To repeat, Section 5 enumerates what the Tariff Commission is tasked to determine: (a) whether a product is being imported into the country in increased _______________

132 Rollo, p. 1321. 133 Supra note 89. 134 See Section 5, Rep. Act No. 8800. 135 Supra note 70. 136 Section 6, Rep. Act No. 8800.

137 Section 7, Rep. Act No. 8800. 138 See Section 9, Rep. Act No. 8800. 108

108 SUPREME COURT REPORTS ANNOTATED Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation quantities, irrespective of whether the product is absolute or relative to the domestic production; and (b) whether the importation in increased quantities is such that it causes serious injury or threat to the domestic industry.139 The findings of the Tariff Commission as to these matters constitute the final determination, which may be either positive or negative. 4. Under Section 13 of the SMA, if the Tariff Commission makes a positive determination, the Tariff Commission recommends to the [DTI] Secretary an appropriate definitive measure. The Tariff Commission may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the products, to alleviate the injury or threat thereof to the domestic industry, and to facilitate positive adjustment to import competition.140 5. If the Tariff Commission makes a positive final determination, the DTI Secretary is then to decide, within fifteen (15) days from receipt of the report, as to what appropriate safeguard measures should he impose. 6. However, if the Tariff Commission makes a negative final determination, the DTI Secretary cannot impose any definitive safeguard measure. Under Section 13, he is instructed instead to return whatever cash bond was paid by the applicant upon the initiation of the action for safeguard measure. The Effect of the Courts Decision The Court of Appeals erred in remanding the case back to the DTI Secretary, with the instruction that the DTI Secretary may impose a general safeguard measure even if there is no positive final determination from the Tariff Commission. More crucially, the Court of Appeals could not have acquired

jurisdiction over Philcemcors petition for certiorari in the first place, as Section 29 of the SMA properly vests jurisdiction on the CTA. Consequently, the assailed Decision is an absolute nullity, and we declare it as such. What is the effect of the nullity of the assailed Decision on the 5 June 2003 Decision of the DTI Secretary imposing the general _______________

139 Supra note 89. 140 Section 13, Rep. Act No. 8800. 109

VOL. 434, JULY 8, 2004 109 Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation safeguard measure? We have recognized that any initial judicial review of a DTI ruling in connection with the imposition of a safeguard measure belongs to the CTA. At the same time, the Court also recognizes the fundamental principle that a null and void judgment cannot produce any legal effect. There is sufficient cause to establish that the 5 June 2003 Decision of the DTI Secretary resulted from the assailed Court of Appeals Decision, even if the latter had not yet become final. Conversely, it can be concluded that it was because of the putative imprimatur of the Court of Appeals Decision that the DTI Secretary issued his ruling imposing the safeguard measure. Since the 5 June 2003 Decision derives its legal effect from the void Decision of the Court of Appeals, this ruling of the DTI Secretary is consequently void. The spring cannot rise higher than the source. The DTI Secretary himself acknowledged that he drew stimulating force from the appellate courts Decision for in his own 5 June 2003 Decision, he declared:

From the aforementioned ruling, the CA has remanded the case to the DTI Secretary for a final decision. Thus, there is no legal impediment for the Secretary to decide on the application.141 The inescapable conclusion is that the DTI Secretary needed the assailed Decision of the Court of Appeals to justify his rendering a second Decision. He explicitly invoked the Court of Appeals Decision as basis for rendering his 5 June 2003 ruling, and implicitly recognized that without such Decision he would not have the authority to revoke his previous ruling and render a new, obverse ruling. It is clear then that the 25 June 2003 Decision of the DTI Secretary is a product of the void Decision, it being an attempt to carry out such null judgment. There is therefore no choice but to declare it void as well, lest we sanction the perverse existence of a fruit from a non-existent tree. It does not even matter what the disposition of the 25 June 2003 Decision was, its nullity would be warranted even if the DTI Secretary chose to uphold his earlier ruling denying the application for safeguard measures. _______________

141 Rollo, p. 682. 110

110 SUPREME COURT REPORTS ANNOTATED Prak vs. Anacan It is also an unfortunate spectacle to behold the DTI Secretary, seeking to enforce a judicial decision which is not yet final and actually pending review on appeal. Had it been a judge who attempted to enforce a decision that is not yet final and executory, he or she would have readily been subjected to sanction by this Court. The DTI Secretary may be beyond the ambit of administrative review by this Court, but we are capacitated to allocate the boundaries set by the law of the land and to exact fealty to the legal order, especially from the instrumentalities and officials of government.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET ASIDE. No Costs. SO ORDERED. Puno (Chairman), Quisumbing, Austria-Martinez and Callejo, Sr., JJ., concur. Petition granted. Note.A period of seven (7) months is certainly more than the period considered reasonable for filing a petition for certiorari. (Cabellan vs. Court of Appeals, 304 SCRA 119 [1999]) o0o

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